RIA M&A is here for the longer term, says Fidelity

investmentnews.com:

There were 52 mergers and acquisitions in the RIA industry in the fourth quarter of 2023 and it’s looking likely that activity will remain strong for some time.

That’s a key takeaway from a new report from Fidelity Investments that reveals that the quarter’s deals saw $54 billion in purchased assets with December alone, recording 19 deals with assets of $8.4 billion. The quarter was just three transactions (down 5%) and $9 billion in assets (down 14%) behind the third quarter’s pace.

The fourth quarter topped out a year which saw a strong start for the industry’s M&A with 70 deals (including reported spillover from 2022), followed by 49 transactions in the second quarter, and 55 in the third quarter which included July’s record-breaking 19 transactions involving $29.6 billion. Across the three quarters, assets averaged $56.8 billion.

However, 2023 was not a record breaker overall and activity was lower than in 2022 with 226 transactions (down 1.7% year-over-year) and $256 billion in purchased assets (down 9.7%).

In the broker-dealer channel, there were five transactions in 2023 with total assets of $196.9 billion, which, while one transaction fewer than in 2022, was a 47% increase in assets thanks to Osaic Wealth’s acquisition of Lincoln Wealth with around $108 billion in assets.

Fidelity’s report cites three factors for the strength of M&A in the RIA space despite the multiple interest rate rises last year:

Private equity was behind 78% of 2023’s RIA M&A transactions, up from 75% of transactions from the previous year as the industry is attracted to RIA’s steady revenue streams, potential for consolidation, and demand for financial advice.  

The report also reveals the rising importance of Texas as a financial hub –