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Fiduciary Push to Drive More M&A

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It’s a common complaint that planners don't prearrange their firms' inevitable succession needs.

But this omission may not fly much longer with regulators, says Chip Roame, founder of research and consulting firm Tiburon Advisors.

"The fiduciary standard is going to shed a light on this," says Roame who predicts that, if the Labor Department passes a standard, firms ultimately will be required to put plans in place.

The fiduciary standard and the rapidly aging advisor population are two main factors that will drive an increased focus on succession-driven M&A deals for advisory firms, he says.


The RIA market is a $2 trillion to $3 trillion market, Roame says, and about 20% of the assets have been involved in a transaction. All told, deals in the fee-based RIA space have transferred $511.3 billion cumulatively from sellers to buyers since 2006, Tiburon research finds, and that will rise substantially in the coming years, Roame says.

Moreover, any estimates are likely to fall far short of the real numbers, he says, adding that his firm may only have captured a quarter to a half of all the deals. Most transactions occur in private, especially when employees buy firms or partners buy each other out, he notes.
The big numbers in deals that do become public finally prompted Tiburon to focus on the issue, says Roame, who admitted that he, like much of the industry, has been late to understanding the importance of the succession issue.


"I would frame this as a topic that we at Tiburon ignored," he said, "So, apologies."

Now Tiburon is scrambling to count every transaction it can find. In 2014, it found $47.4 billion in deals, Roame said. He said the real number could be $100 billion or more.

Other fee-based advisors accounted for 41% of those 2014 buyouts or mergers, while aggregators came in at a close second, with 38%. Retail banks accounted for 6% and other acquirers 15%, according to Tiburon Research.

By comparison, many more deals were done in the insurance space, Roame says. Insurance agents and third-party administrators did 349 deals last year, compared with 320 in 2014, Tiburon found.

500 DEALS BY 2019

In the fee-based RIA space, Tiburon anticipates that the total number of deals will hit 250 for this year and double to 500 by 2019.

Roame noted that Edelman Financial, where he is a board member, recorded the biggest deal last year: $15 billion acquired by a private equity firm.
"These are big transactions," Roame says. "This trend is getting some legs."

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