Bigger is better. Or at least that is the going trend in the wealth management industry. 2019 was another record setting year when it came to mergers and acquisitions, according to reports from Fidelity Investments and Echelon Partners.
Fidelity reports that over the course of 2019 there were 139 transactions (127 RIA and 12 IBD acquisitions), representing $781.1 billion in assets. That’s an increase of 48 percent and 38 percent, respectively, from 2018.
Echelon Partners, meanwhile, reports 203 deals over the course of 2019 representing $285 billion. Those numbers exclude larger transactions over the $20 billion mark.
The differences in numbers come from what Fidelity and Echelon what the reports were willing to consider when it came to mergers or acquisitions. For example, Echelon Partners counted Schwab’s acquisition of TD Ameritrade for an estimated $26 billion, which Fidelity does not include, along with other breakaway deals from one wire house to another. Schwab’s acquisition will also provide an estimated $1.3 trillion in custodial assets.
Other major deals highlighted by both reports (Echelon reported these outside its total assets under management figure), include Advisor Group’s acquisition of Ladenberg Thalmann ($181.1 billion AUM), Warburg Pincus’s acquisition of Kestra Financial ($77 billion AUM, according to Fidelity; $92 billion AUM, according to Echelon Partners); Hub International’s acquisition of Global Retirement Partners ($40.1 billion AUM); and Goldman Sachs’ acquisition of United Capital, with an estimated $25 billion in AUM.
Scott Slater, M&A Specialist and VP of Practice Management & Consultant at Fidelity Clearing & Custody Solutions, only expects these numbers to grow in 2020. “Looking ahead to 2020, we expect the same driving forces – external capital, growing operating costs, the search for talent and the need to scale – to pave the way for another year of strong activity,” he said in a statement.
The same principle holds true for RIAs, as a record 33 deals with over $1 billion in assets occurred in 2019, according to Fidelity. Echelon reports that such firms are “ideal platforms” for acquisition because they “possess the ideal mix of size and development,” including the pep staff, processes and technologies, infrastructure and most have over $3 million in EBITDA, which most professional investors require.
Focus Financial had the most acquisitions in 2019--a staggering 18. They were followed by Mercer Advisors (12), and Wealth Enhancement (7).
2020 is off to a hot start already as last week Envestnet announced it secured a minority stake in Dynasty.
