March 31, 2020
Linda Willis

Over the past few years the RIA market has been all about the buyers. Everyone has been a buyer – large RIAs, hybrids, small RIAs, wirehouse advisors, solo advisors, former wholesalers and wirehouse managers and Private Equity firms. Notably even more seasoned advisors – think advisors in their 80’s – who most people would consider to be natural sellers were looking to buy other practices and firms. While it remains to be seen what the current Coronavirus impact will be on the RIA M&A market in the immediate future, from all current indications and if the past is prescient then buyers will increase. More buyers mean more competition for the firms who are willing to sell. The competition is and will continue to be stiff with respect to successfully courting and consummating an acquisition. For the smallest firms/practices/advisors – sub-$100MM in AUM – it has been and will continue to be difficult to attract acquisition opportunities. There is a solution which often offers greater upside potential – a merger. SO many advisors are reticent to entertain the thought of a merger. The most frequently voiced objection creating pushback is LOSS OF CONTROL. Second most frequent reason for pushback is LOSS OF BRAND.



Sole control – a dictatorship – a monarchy – indeed may no longer be the order of the day if a merger is undertaken. That said, a sharing of power when the resulting fruits bear exponential rewards for all parties, is compelling and a good trade. Case in point: sub-$100MM firm with a mid-50’s founder and a 30-year-old up and coming advisor with great business development skills who was being overtaxed with administrative, operational and portfolio related tasks merged with a another 30-year-old solo RIA firm (sub-$25MM AUM). The solo RIA founder not only was good at portfolio management but also embodied the qualities and skills as well as had an interest and aptitude for the administrative/operational aspects of running the firm. The combination has proven to be impactful and successful. When the merger was consummated it was structured with a longer-term objective of the two younger partners ultimately buying the senior advisor out of the business over time. Since the merger, the new combined firm has added an advisor with whom there is also a succession plan in place and is engaged in an acquisition to buy a sub-$100MM firm. Asset under management in the new combined firm today – before the pending acquisition – exceed $200MM. The new combined firm with more assets and broader capabilities allocated across its members based on skills and talents is better positioned to compete for acquisitions and merge to succession opportunities in the market.



Loss of brand is the objection that is most perplexing. It is astonishing the number of times a founder of an RIA no matter how big or small believes that their brand – often times named for them – has such value that it cannot be replaced. The reality as all advisors know or should know is people do business with people they trust. An institution may be able to offer certain needed services that an individual advisor alone may not be able to offer without accessing a third-party provider – i.e. banking/lending/alternatives – but few if any RIAs with a founders’ name across the door hold positions of such prominent notoriety that people flock there solely because of the name on the door. A merger creates an opportunity to reinvigorate relationships with clients and market the broader capabilities/talents/synergies created through the new combined firm. Regardless of the name selected for the new combined firm – whether one firm’s name remains, or an entirely new name is chosen – it is about the people, the trust and the continuity of care for clients. Brand is often equal to ego. An ego is good, it is what helps us succeed especially in this business. However, when ego has humility and allows one to look at the powerful combination of “we” versus just “me” – true success is borne.

Mergers can be a powerful path to achieve greater organic growth as well as aligning and positioning you and your firm for greater growth through M&A.