Wealth Manager Consolidation Intensifies in Pursuit of Capturing Client Walletshare

May 9, 2024 — Boston

Scale and a desire to capture a greater share of the advice value chain is driving M&A activity across the industry

Consolidation continues to loom large across the financial services universe—with no signs of stopping. A new white paper from Cerulli, Wealth Manager Consolidation: Analyzing the Factors Behind a Ripe M&A Deal Environment, examines the driving forces underpinning consolidation in the wealth management industry and how a flurry of activity is most likely to affect the competitive environment going forward.

An imperative to become bigger and more profitable has governed much of the heightened M&A activity that has been underway in the wealth management industry for more than a decade, resulting in an environment dominated by key players. According to Cerulli, the top-five wealth management firms control 57% of broker/dealer (B/D) assets under management (AUM) and 32% of B/D advisors, while the top-25 B/D firms and their various affiliates control 92% of AUM and 79% of advisors.

Wealth managers are increasingly focused on providing truly comprehensive wealth management, pursuing M&A to bolster capabilities and capture more of the value chain. While increasing client walletshare has been an elusive industry goal for decades, Cerulli observes a sizeable consolidation opportunity among affluent investors. According to the research, 57% of advised households would prefer to consolidate their financial assets to a single institution; however, just 32% use the same provider for cash management and investment services.

“In the wake of a merger or acquisition, firms rarely emerge as well-oiled machines providing best-in-class capabilities and service offerings,” says Bing Waldert, managing director. “Vertical integration of technology systems, migration of client accounts, and changes in workplace culture are all potential pain points when an organization restructures. As wealth management firms enter new segments through acquisition, they must have a plan to transition clients to service models that meet their needs.”

Now more than ever, due diligence is a step that must fully play out. “Deals that make sense on paper can prove to be cautionary tales when acquirers miscalculate the impact of melding operations,” says Waldert. “In a wealth management environment where advisors and assets are on the move more than ever before, there is increased potential that a deal may have negative ramifications for advisor retention,” he concludes.

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Note to editors

These findings and more are from Cerulli’s white paper: Wealth Manager Consolidation: Analyzing the Factors Behind a Ripe M&A Deal Environment.

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