New data on mergers and acquisitions in the registered investment advisory market indicates that this year may set another record for such deals, despite the difficult financial market conditions, the subprime debacle, and tightened credit, according to a survey by Schwab Institutional.
The San Francisco unit of Charles Schwab Corp. said on Monday that, as of Sept. 5, there had been 49 M&A deals this year and more large financial institutions were showing interest in buying smaller registered investment advisers.
"Popularity for the independent financial advisory model gains … momentum" during the financial crisis, Schwab said.
Another reason for the increase in M&A activity is that many principals in RIA firms are nearing retirement age. Schwab Institutional said that the average RIA principal is 55 years old and 30% are older than 60.
Other factors behind the increase include the rise of holding companies with business models built around making acquisitions, private-equity firms that see the RIA business as having high profits and strong growth rates, and RIAs looking to ensure their succession.
The $9.4 billion in net new assets that came into Schwab Institutional from newly independent advisers in the first half was 300% more than the year earlier.