Acquisition opportunities among RIA firms remain bountiful as more financial advisors expect to retire within the next decade, finds new research from Cerulli Associates.
Over the next 10 years, 105,887 advisors plan to retire, comprising 37.4% of the industry and 41.4% of total assets. Still, over a quarter (26%) say they aren’t sure about their retirement strategy, with this rate being the highest among advisors affiliated with independent RIA firms.
Plus, independent RIA owners say they face a slew of challenges in building a succession plan, including finding a qualified buyer for their practice (86%), structuring deal terms (63%), and valuing their practice organically (53%).
This represents an opportunity for firms who are looking to grow their practices inorganically, Cerulli finds. The research notes how 48% of advisors say they’re interested in acquiring a practice, and 28% are open to an acquisition but are not actively searching for one. Nineteen percent of firms surveyed admit they are searching for acquisition opportunities.
Despite their interest, firms say they regularly experience challenges when acquiring a practice. This includes the investment of time necessary to finalize a deal (67%), along with negotiation and style differences with the seller (53%).
“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 at Cerulli.
For firms wanting to grow inorganically through RIA acquisition, Blake advises them to invest time and resources in evaluating the quality of their client experience, along with understanding how their business approaches client-centric manners.
“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,” he says.
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