Corner Office Views | Q1 2024

Prepare for Consolidation

Our latest insights piece covers M&A deal considerations, highlighting the motivations for deals and the segments of the market that will undergo change—wealth management, retirement, wealth management technology, and alternative investments.

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Foreword by

Bing Waldert
Managing Director, U.S. Research
Biography→

Private capital is flowing into the wealth management industry, fueling consolidation of the former cottage industries of retirement plan consulting and independent registered investment advisor (RIA) firms. These quickly expanding formed enterprises are often striving for broader market expansion that affirms their place in the value chain, affording them greater clout and profitability with vendors and business partners, such as product manufacturers and FinTech providers.

Our latest insights piece covers M&A deal considerations, highlighting the motivations for deals and the segments of the market that will undergo change—wealth management, retirement, wealth management technology, and alternative investments.

Wealth manager consolidation occurs for a variety of different reasons, but typically deals fall somewhere on a spectrum between pure scalar plays—acquisitions by often large firms aiming to become larger, through some combination of advisor headcount and geographic expansion—and tactical transactions motivated by a number of ongoing trends in the industry such as varying advisor desire for autonomy and the imperative to stay apace with wealthtech, platform innovation, and other capabilities that enhance competitive positioning and differentiation.

Key Points

 

RIA Acquisition Interest, 2023

These key motivations all contribute to the perpetual pursuit for scale, which affords wealth managers more influence over a greater portion of client portfolios. Scale also gives wealth managers more negotiating power over asset managers that rely on B/Ds to distribute their products, include them in home-office models, or include them as select offerings within portfolios that advisors directly manage. As a result, B/D firms with greater influence are able to maximize revenue from asset managers for distribution in its various forms, including revenue sharing, strategic marketing costs, and data packages.

In the end, the industry as we know it today will be significantly changed in a short period of time. Our goal is to provide you with the strategic insights that you need to retool for what’s ahead. We hope this intelligence is helpful to you as you navigate your business through its next phase of growth.

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