Mergers and acquisitions will become more crucial for registered investment advisor firms to compete, according to industry executives.
“People are becoming aware that you’re either going to be the disruptor or the disrupted. There’s really not a great middle ground,” Carson Group founder and chief executive officer Ron Carson said Tuesday during a livestreamed discussion among RIA executives hosted by public relations firm JConnelly.
Sanctuary Wealth CEO Jim Dickson said an advisor’s age and the complexity of the business play a large role in driving RIA M&A activity. Advisors aged 55 or older make up 43% of the industry’s headcount, according to data from research firm Cerulli Associates.
“As the business gets harder and as technology continues to grow, they’re at the point of saying, ‘It’s time to hand the keys over,’ and then it really becomes about how prepared are they,” Dickson said at the discussion.
The pandemic accelerated the M&A process for many advisors, according to Dickson.
“A lot of people aren’t prepared but Covid was that moment that they looked under the cover and said, ‘I better figure this out.’ It’s our belief that two years post-Covid, you’re going to see an explosion of sales,” Dickson said.
M&As won’t just help RIA firms compete, they will also help them stay relevant, according to Hightower Advisors CEO Bob Oros.
“If you’re an advisory firm, how do you stay relevant? The definition of relevance is constantly evolving and changing. What used to be perceived as value 10 years, 20 years ago, is [now] table stakes and likely highly commoditized,” Oros said at the discussion.
Carolyn Armitage, head of Thrivent Advisor Network, said one’s experience as a financial advisor doesn’t necessarily translate to guaranteed success with an M&A.
“For the advisors that try to DIY this … [whether they’re buyers or sellers] … they’re really at a disadvantage to these larger firms that have dedicated and experienced [M&A] teams — not just an individual, not just a successful advisor — but experienced deal teams,” Armitage said at the discussion.
Armitage went on to say that advisors should seek out third-party experts to assist them with M&A transactions.
“I would highly encourage individual advisors, whether they’re on the buy side or sell side to have some support and not do this alone — especially on the sell side for the most important financial decision of their career,” she said at the discussion.
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