RIAs ‘ripe for consolidation’
BOCA RATON, Fla. – With advisors and assets fleeing the wirehouses, the RIA market is gearing up for consolidation.
Industrywide, regional brokerages have dominated the recruiting landscape. While the big four firms picked up $14 billion in client assets this year, the regionals and boutiques netted over $27 billion, according to hiring announcements.
With significant chunks of AUM flowing into the RIA space, firms will likely consolidate to capture the benefits of scale, said Bill Van Law, president of the investment advisor division at Raymond James.
Moreover, advisors should expect “significant opportunities” for growth in the independent space that are “unprecedented in the evolution of the industry,” Van Law said at Raymond James’ Wealth Managers conference in Boca Raton, Florida.
He expects a watershed moment for RIA recruiting in the near future. “Breakaway recruiting is going to hit a tipping point,” Van Law says. “Reversing that trend just isn’t going to happen.”
To be sure, wirehoueses stopped putting as much attention on recruiting, which hurt their numbers. And the outlook moving forward is just as bleak. The channel is expected to decline from 37% of advisor-controlled assets in 2015 to just 32% in the next three years, according to Cerulli research.
Conversely, independent RIAs and hybrids will continue to pick up steam, from 23% of the market’s assets in 2015 to 28% by 2020, according to the research.
In addition, many advisors are simply getting older and looking for ways to slow down, Van Law says, creating significant opportunities for growth.
Retirement-ready advisors should increase the value of their business in the near term to prepare for an exit, he suggests, while younger advisors should look to expand through acquisitions.