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The Consolidation Drive Continues

As we return to work in the new year, we are greeted with the news that serial aggregator Hightower has completed its largest acquisition to date. The private equity backed firm purchased the UHNW-focused, $8B Bel Air Investment Advisors from Fiera Capital. Hightower has been on an M&A roll, having completed some 14 acquisitions since 2019. This pace is likely to continue as the firm’s growth strategy was recently refueled with a $700-$800MM capital raise from Goldman Sachs, Neuberger Berman and Coller Capital. 

This auspicious start to 2021 marks a continuation of the record pace of RIA acquisitions in the closing quarters of 2020. In response to COVID-19, acquisition activity in the RIA market tanked in 2Q20. But as the financial markets rebounded, so did the longer-term consolidation trend. By the end of the year, annual RIA transactions hit a new record, as the chart from Echelon Partners below shows.

Source: Echelon Partners

Transactions in 2020 were dominated by roll-up firms, such as CI Financial, Hightower, Creative Planning, Mercer and Focus Financial. Together these five firms accounted for 39 deals. The average AUM per transaction also rose in the year to $1.8B, up 24% from 2019.

It’s likely that the consolidation wave will continue through 2021. The favorable demographics have not changed nor has the drive for scale efficiencies and brand dominance. It also seems to be the consensus that financial markets will remain relatively supportive of the wealth management business as the new year progresses, vaccines become more widely available and a return to “normality” approaches.