RIA Acquisition Opportunities Remain Fertile as Succession Looms Large
January 15, 2025 — Boston
The growth of the independent channel has added complexity to advisor succession, yet opportunity for acquisition
With more than one-third of financial advisors expecting to retire within the next 10 years, the succession and transition of advisor practices remains an incredibly important matter for advisors and wealth management firms alike. While the growth of independent affiliation has increased the complexity associated with advisor retirements, it has also created a new level of growth within the channel through the acquisition of independent practices, according to The Cerulli Report—U.S. Advisor Metrics 2024.
Over the next decade, 105,887 advisors plan to retire, comprising 37.4% of industry headcount and 41.4% of total assets. However, more than one-quarter (26%) of advisors who anticipate retiring within the next decade are unsure of their retirement plans, with this rate being highest among advisors who are affiliated with independent RIA firms (30%).The growth of independent affiliation is increasing the share of financial advisors who operate as independent business owners and will also oversee their own business succession. These advisors face a variety of challenges associated with developing a business succession plan that is necessary for them to retire, including finding a qualified buyer for their practice (86%), structuring deal terms (63%), and valuing their practice accurately (53%), among other challenges.
At the same time, firms that are interested in growing inorganically through the acquisition of other advisor practices face challenges as well, including the investment of time necessary to finalize a deal (67%) and negotiation and style differences with the seller (53%).
Cerulli’s research shows almost half (48%) of advisors are interested in acquiring a practice. Almost one-third of financial advisors (28%) are open to an acquisition but not actively searching for one, while 19% are actively searching for acquisition opportunities.
“The significant challenges faced both by sellers and potential buyers have created robust demand for third-party firms that can provide expert valuation and advisory services as they relate to these types of transactions, and for firms such as independent broker/dealers for whom these services create an opportunity to expand their value proposition to their affiliated advisors,” says Andrew Blake, associate director.
Those advisor practices that are looking to grow inorganically through acquisition should invest the time and resources necessary to objectively evaluate the quality of the experience that they offer to clients and the extent to which their business operates in a client-centric manner, both in philosophy and in practice. “By doing so, not only will advisors maximize the likelihood of acquiring other advisor practices, but they will also maximize the retention of clients of the acquired practice, therein boosting the likelihood of inorganic growth through client referrals,” concludes Blake.
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Note to editors
These findings and more are from The Cerulli Report—U.S. Advisor Metrics 2024: Adding Services to Scale.