An area that we follow closely as an indicator of the overall market health is RIA transactions in progress and/or completed, particularly by aggregators. This includes outright acquisitions, as well as joint ventures or major new offerings. After a record number of transactions in 2019 at unprecedented multiples and a strong Q1 2020 start, March and April deals declined sharply as the markets reacted to the impact of COVID-19.
However, we are seeing some signs of renewed activity, as firms adapt their deal focus to align with the environment. Some examples:
1. Kestra Financial’s Bluespring Wealth Partners, an acquirer of RIAs and wealth management firms, with an emphasis on providing succession strategies, sees demand accelerating for succession planning from firms
2. Hightower Advisors continues to concentrate on RIAs versus breakaway brokers and announced two transactions in April and May, the first being the purchase of tax and estate planning specialists, Wellspring Associates and the second taking a stake in RIA Osborn, Williams and Donohoe
3. In April, Dynasty Partners and Mariner Wealth Advisors introduced a wealth management platform, Mariner Platform Solutions, which combines “Mariner’s Wealth Management skills with Dynasty’s Core Services platform and its turnkey asset management platform.” Typically, Mariner’s acquisitions are absorbed into the Mariner brand and structure. This model facilitates transactions with firms that want to partner with Mariner, while remaining independent. Mariner has also taken a minority stake in Dynasty Partners
4. Goldman Sachs, after acquiring United Capital in 2019 and folding it into the Goldman Sachs brand, in mid-May announced its intention to buy Folio Financial, which offers retail robo-advisory services and an RIA custody platform
Aggregators, often backed by PE firms that need to deploy capital, have served as a gauge for deal strength and valuations. Similarly, as we look at the current opportunities, we study what aggregator activities might portend. Our takeaway is that, as the climate has shifted away from being a seller’s market, aggregator and other firms have begun to be more thoughtful and strategic in their transactions. While this may not be a permanent change, we anticipate that it will continue at least through the end of 2020.