Many acquisition-growth minded advisors are licking their chops at the pending unprecedented wave of retiring advisors over the next 5 to 10 years. We speak to advisors on a daily basis seeking assistance in finding quality practices to acquire. The question we often get from would be acquirers is, “Where are all the sellers?”
Buyers are perplexed that seller opportunities are not more abundant since about 1/3 of advisors will be retiring over the next 10 years. However, according to a recent survey over half of financial advisors are looking to acquire. That’s a lot of competition. Not only is it difficult to find seller opportunities in the current market, but when you do, you’re typically competing against many other buyers, especially in online auction type structures and M&A online matchmaking.
So, where are all the sellers?
M&A numbers are understated
- Most complete and partial acquisitions in the industry are not reported in the media or in industry M&A reports.
- The quantity of the bread and butter of M&A acquisitions completed are not mega billion dollar RIAs, but average size practices, which mostly goes unreported.
- While it is difficult to quantify, we estimate there is at least 5 times the actual M&A activity reported in the industry media and M&A deal books/reports.
- While industry M&A reports do a great job in showing multiple trends, the actual quantity of deals, especially for the under $100MM AUM practices, are understated.
Look behind the veil
- While we encourage buyers to implement a multi-faceted approach in developing current and future seller opportunities, most M&A deals aren’t originated through online auctions, M&A “bulletin boards”, or even through third party M&A consultants (including Advisorbox). The vast majority of advisory acquisitions happens quietly, behind the veil of the IBD (independent broker dealer) or custodian.
- Most acquisitions come from an IBD or custodian introducing and matching their sellers to the buyers affiliated and within, their broker dealer or custodian.
- There are leading IBDs and custodians who put their inorganic growth focused buyers in a much more favorable acquisition strategic position than advisors affiliated elsewhere.
- If inorganic growth is critical to your growth strategy the #1 strategic advantage to have, is to be partnered with the right IBD or custodian.
Finding the best seller pools
- If most of the industry acquisitions happen behind the veils of independent broker dealers and custodians, then being affiliated with the right firm is critical to maximize seller opportunities.
- With the average age of a seller at 59 years old, acquirers should consider partnering with a broker dealer or custodian that has a deep pool of advisors in this age range now, and over the next 10 years.
- Our soon to be released BluePaper report of the best seller pools in the industry identifies the current and pending seller demographics and average revenue per practice at different firms and the results are surprising.
- For example we found that there are currently about 1,000 independent advisors 59 years or older at Ameriprise Financial which is more than over 100 independent broker dealers each have in total When you add another 1,000 advisors who will be reaching 59 years old in the next ten years, then Ameriprise has a total seller pool of 2,000 advisors, which is more than Wells Fargo FiNet, Commonwealth, Waddell & Reed, Royal Alliance, and Kestra each have in total advisors.
- Not that bigger is always better but there are firms who clearly offer larger seller pools than others.
IBDs dwarf RIA acquisition quantity
- Advisorbox helps advisors with both IBD and RIA M&A. While the big RIA acquisitions get all the headlines, the majority of the industry acquisitions happen on the IBD side.
- We’re not a big fan of LPL but this one IBD alone, has more advisors than there are in total RIAs in the industry. LPL alone has half the total advisors of the entire RIA industry when you include all of the IAs affiliated with RIAs.
- Within Ameriprise there are more quantity of annual internal acquisitions than the entire annual quantity done within all of the RIA industry.
- Yes the billion-dollar RIA is an appealing acquisition target, but when most advisors get realistic about the size of acquisition they can handle, afford, and effectively compete for, most acquisition minded advisors who aren’t a consolidator or private equity firm, prefer fishing in the pools where the fish are more plentiful and ideal size.
- In the RIA space, you have a bunch of small practices and a bunch of mega RIAs, but not many in the middle sweet spot where most advisors are looking to (and can afford) acquire practices, those sellers between the 50MM and 500MM AUM range.
- Generally speaking, RIAs aren’t buying IBD practices and IBD practices aren’t buying RIAs.
- While we love and support the RIA model and RIA M&A is at record levels, if growth through acquisitions is your top priority, the IBD model dwarfs the RIA model in the quantity of M&A deals being done and offers a much bigger pool of sellers to fish from.
Get third party help
Advisorbox maintains a Buyer List of prequalified buyers who we select from to introduce to the succession & selling advisors we work with. To be on our list is free, however buyers must complete our pre qualification process to be added. If there is a successful match than a success fee is charged to the buyer. For motivated buyers we have always recommended a multi-faceted approach. Check out these websites for third party support for seller introductions and matchmaking.
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