Retiring Advisers Drive RIA M&A as Channel Nears $4 Trillion, Cerulli Says

More than 26,000 financial advisers are projected to retire over the next decade, representing the largest addressable acquisition market in the registered investment adviser channel by assets under management, according to new research from Cerulli Associates.

The research estimates the RIA market will surpass $4 trillion as consolidation accelerates. More than half of RIAs are seeking to acquire other firms, a share that has grown in recent years as the volume of available targets has become more apparent, Cerulli said.

“Adviser retirements remain the largest addressable market for RIA acquisitions in terms of assets under management,” said Stephen Caruso, associate director at Cerulli. “On average, these retiring advisers have larger books of business than employee advisers looking to break away.”

Hybrid RIAs are the most acquisitive segment of the independent channel, and most RIAs report being at least somewhat interested in acquiring other firms, Cerulli found.

Breakaway advisers – those transitioning out of captive broker-dealer arrangements – represent a second acquisition opportunity, though Cerulli said those transitions have grown more complex in recent years.

In the past five years, some of the biggest transactions in the industry involved mergers, acquisitions, and platform consolidations among independent broker-dealers. Examples include: LPL Financial’s acquisition of Commonwealth Financial Network; LPL’s acquisition of Atria Wealth; and Advisor Group rebranding as Osaic Wealth and the consolidation of its subsidiary broker-dealers.

Firms are pursuing mergers and acquisitions primarily to achieve scale, respond to client demands, and keep pace with platform and technology requirements, the research found. Large aggregators are expected to drive an integration-focused approach as the market matures.

“As RIAs continue to consolidate and capture acquisition opportunities, the need to drive value across a pool of affiliated RIAs or practices is critical,” Caruso said. “Firms need to navigate new challenges while maintaining the scalability of the business. With large aggregators looking to drive at-scale solutions, Cerulli expects more firms to use an integration-based approach to the market.”

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