The role of geography in potential business opportunities for financial advisors can be hard to calculate in exact numbers, but the impact of location is changing in notable ways.
Together, the rise of remote and hybrid offices across the industry and the continuing consolidation of registered investment advisory firms have altered the landscape of geographic expansion strategies and M&A deals. Both trends also add complexity to the question of, say, which states have the most potential assets under management in play.
In 2024,
In the past, "Very few retiring advisors or sellers would consider a buyer who was not within driving distance," he said, citing the continuing rise in the share of transactions involving out-of-state buyers. "That's an absurd figure in a professional service business."
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One recent study tracking the states with the highest and lowest potential AUM also delivered interesting findings on the degree of RIA saturation across the country. To be sure, the data limitations related to some 32,000 firms
"While consumer demand for advisors may vary from place to place, it doesn't necessarily tell the whole story of the potential assets under management at stake and how competition in the advisor industry may look," DeJohn wrote. "Both factors may impact the ROI an advisor gets on
Regardless of the difficulties with this study (
The other end of the spectrum, involving the states with the lowest market saturation, offered some surprises, too. Washington ($119,989,420) and Hawaii ($917,591,927) shared top-five spots in the rankings with Maine ($341,176,483), New Mexico ($200,937,398) and Mississippi ($136,860,840).
In that sense, the conclusions (with some cautionary notes) followed the pattern of other SmartAsset studies this year that have analyzed the cities where advisor income
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The so-called new normal in the wake of COVID-19 has dampened some other traditional industry geographical dynamics as well, according to Grau.
For one, sellers began reaping the benefits of higher average revenue multiples paid by out-of-state buyers during the pandemic, to the tune of
And moves by
That enduring shift stems from the fact that wealth management investors have identified "some interesting financial arbitrage" available outside the industry's standard Wall Street and generally West Coast and East Coast focus, he said. While no one is "going to retire early" based on that strategy, a geographic lens shows how firms in other regions could generate higher profit margins due to lower overhead costs like payroll, he said.
"You are still seeing a cost-of-living difference, and thus it costs more to operate a $100 million RIA in California than it does in Michigan," Grau said. "The human capital there costs me less to deliver the same service to the same clients for the same fee."