Issue link: https://resources.envestnet.com/i/1527630
FOR ADVISOR USE ONLY. NOT FOR PUBLIC DISTRIBUTION. 3 *Excludes transactions where AUM acquired is above $20B or below $100M. 4.0 3.5 3 2.5 2 1.5 1 0.5 0 400 350 300 250 200 150 100 50 0 # of Transactions Avg. Transaction Size ($B) 181 203 205 307 342 321 168 2018 2019 2020 2021 2022 2023 2017 1.0 1.3 1.5 1.8 2.1 1.6 1.7 Number and size of RIA M&A Deals 4 12 10 8 6 4 2 0 5.1 6.6 8 9 10 2018 2019 2020 2021 2022 2023 9.6 Median Adjusted EBITDA Multiple 4 Takeaway Advisors who don't plan on transforming their firms into enterprises or selling their book of business need a strategic plan for growth, just as their clients do. Consolidation Similar to the banking industry, mergers and acquisitions in the RIA channel continue unabated. According to Cerulli research, billion- dollar RIA firms have more than doubled their firm market share in the last decade. Today, the largest 9% of advisory firms control 73% of client assets in the marketplace. 1 As bigger firms are getting bigger, smaller RIA firms are shrinking in size and number. From 2020 to 2021, the RIA channel lost 6% of its firm count, and 1% annually over the prior five years. The segment that's most affected are smaller RIAs with $100 million or less in assets under management. 2 Reasons for decreasing RIA firm numbers include mergers and acquisitions, declining profit margins, and increased competition against larger firms flush with resources and capital. In addition, many older, established advisors are winding down their businesses. Cerulli reports that over the next decade, 110,000 of advisors – almost 40% of the overall advisor workforce – plan to retire 3 , and it remains to be seen whether these advisors will move their book of business to a partner, small RIA firm, or big enterprise player.