RIA Consolidation Numbers Prove Controversial, But Activity Keeps Chugging Along

Thursday, January 26, 2012 10:00
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RIA Consolidation Numbers Prove Controversial, But Activity Keeps Chugging Along

Tags: M&A

The 2011 registered investment advisor M&A statistics from Schwab are being interpreted in a lot of different ways, but it's hard to argue that activity is either booming or going over any cliffs.

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In all, RIAs were involved in 57 big deals last year, moving an average of $798 million in AUM apiece.

 

Last year printed 70 deals and the average transaction that Schwab tracked was bigger, representing an average of $895 million per firm being bought out.

 

Some say this represents a slowdown in the pace of industry consolidation. Others say it's business as usual.

 

And since Schwab tinkered with its methodology this time around, year-to-year comparisons may be tricky at best.

 

Maybe the biggest thing this reveals is that there's still a lot of room for consolidation left throughout the business.

 

If there are -- as reported -- 1,200 firms that collectively hold 80% of the assets in the channel, they're still getting bought out at a rate of 4% to 5% a year.

 

And a lot of these giants don't work with retail clients at all. 

 

Schwab used to track institutional RIAs and hedge funds in their M&A stats. Having them in the mix dramatically distorted the way the numbers reflected the typical retail advisor's world.

 

For example, in 2010, the old methodology showed 55% more deals and a staggering 147% more AUM in play for an average deal of roughly $1.43 billion.

 

Does the typical retail RIA that gets bought out have $1.43 billion in AUM? Not really -- and this was never true in the first place. 

 

 

 

 

 

 

 

 

 

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