Financial Planners' M&A Drops As Rates, Uncertainty Jump

Number of deals set to decline for the first time in nine years, report says.

By Jeff Benjamin, - With just two months left in the year, 2023 is on track to derail a nine-year streak for record-setting mergers and acquisitions in the financial planning industry. 

While completed major deals are still popping up, the general trend reveals a slowdown due to higher interest rates and growing economic uncertainty, according to the latest research from DeVoe & Co.  

The title of the 12-page document says it all: “2023 Trending Toward a Down Year” (italics theirs).  

“On the buy side, valuations have not decreased but the interest rates have increased the cost of capital and affected the debt ratios of major acquirers,” said David DeVoe, founder and chief executive of the research and consulting firm. 

“This has created an environment where some buyers are leaning into transactions and those that haven’t raised money in a while are dialing back and being pickier,” he added.  

Through September, DeVoe tracked 185 deals, which represents an 8.9% decrease from the same period a year ago. 

The third quarter, through September, included 65 deals, compared to 68 in last year’s third quarter. To reach last year’s record total of 264, financial advisory firms would need to log 79 more deals before the end of the year—which would exceed the high set in the fourth quarter of 2021 of 76 deals. 

“It’s been nine straight record years and we’re now tracking toward a decline,” said DeVoe. 

RIA M&A Trend is Far From Over 

Yet there are plenty of reasons to believe the M&A train is not screeching to a halt.  

According to DeVoe’s research, just 18% of registered investment advisory firms are in a position to sell internally to the next generation of advisors, because the rising valuations of RIAs keep pushing internal deals further out of reach. That figure is down from 29% in 2022 and 38% in 2021. 

On top of the affordability problem, DeVoe said “readiness also keeps next-gen advisors from taking the reins. 

“Many next-gen advisors have not received the training or mentoring to prepare for the job,” he added.  

On the financing side, firms such as SkyView Partners are finding booming opportunities to fill the gap, according to company president Katie Bruner

“We entered the space to be an alternative capital source for buyers and sellers that didn’t want private equity, because many firms don’t want to sell to a private equity buyer,” she said.  

Less than six years after entering the RIA lending space, and having participated in 330 wealth management industry deals, Bruner said business is good but that the way deals get done has clearly evolved. 

“We have seen things change significantly, particularly over the last 18 months,” she said.  

Fed Policy Has Resulted in More Creative Deal Structures 

Higher borrowing costs and market volatility have meant more deals structured with less upfront payout and more delayed compensation tied to seller retention and performance. 

“Deals structures have become more complex and we have seen significantly longer deal cycles,” Bruner said. “We have also seen a higher number of deals fall through.” 

Meanwhile, deals are still getting done: 185 so far this year is nothing to sneeze at. 

Wealthspire Advisors, a $25 billion RIA that announced the acquisition of $3 billion GM Advisory Group in September, has not experienced a lull, according to chief executive Mike LaMena. 

“We’re not seeing any slowdown in terms of the number and quality of opportunities being put in front of us, but it feels like buyers are being more selective and thoughtful,” he said.  

Wealthspire has done four deals over the past two years. 

Hoyt Stastney, Wealthspire general counsel and head of M&A, said against the current macroeconomic backdrop, “the number of deals getting done this year shows the resilience of the industry.” 

According to DeVoe, the general slowdown in deal activity will likely place more emphasis on organic growth, which he believes many RIAs have ignored. 

“On the seller’s side, there’s a perception that valuations are compressed so they may have to refocus on other parts of the business,” he said. 

DeVoe noted that the average true organic RIA asset growth rate has dropped from 9% to 3% over the last five years. 

“Complacency kicked in after years of bull markets growing great and firms started investing less in organic growth,” he said. “We’ve seen a surge of interest in growing and putting a better growth machine in place.” 

Contact Jeff Benjamin at and find him on X at @BenJiWriter

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