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Elite Advisors Say Scalability, Succession Needs Will Fuel More RIA Deal Activity

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Some of the largest registered investment advisors (“RIAs”) not only expect industry consolidation to accelerate in the coming year, many plan to contribute to this trend directly by making an acquisition, according to a survey conducted by TD Ameritrade Institutional1 during its 2014 Elite Summit.

According to the survey, about 72 percent of RIAs predict deal activity will rise in the coming year, and 10 percent expect a “significant” increase. Roughly half of the advisors, moreover, said they are looking to make one or even multiple acquisitions. The firms of the Elite Summit attendees on average managed more than $1 billion in client assets.

The majority of these larger advisors view themselves as buyers. More than two thirds of the respondents don’t expect to sell or merge in any time horizon, though 11 percent said they would consider a sale or merger of their firm in the next five years.

The desire among RIA principals to build firms that can sustain growth be better positioned to endure after they depart, may be leading more advisors to consider a merger. Specifically, more than half of the RIAs expect that succession will be the primary driver of deal activity, while 35 percent said transactions would be motivated by a push for scalability – the capacity to profitably add more clients.

These catalysts were mentioned more often than the causes most often cited for fueling industry, namely margin pressures, technology expenses or mounting regulation.

Taken together, the survey results show that elite investment advisors view mergers and acquisitions as an important element of a broader, long-term growth strategy.

“Advisors are eager to continue expanding, but there is intense competition for new clients and organic growth by itself takes time. Acquiring an RIA firm or adding advisor teams can be an important part of a comprehensive business-development strategy, for both buyers and sellers,” said Pete Dorsey, managing director of sales at TD Ameritrade Institutional. “The key for advisors, in any scenario, is finding the right cultural fit.”

Indeed, elite advisors who are buyers look for more than just size when assessing potential acquisition targets. The biggest drivers for a firm’s takeover value are the quality of the firm’s clients and revenue stream, more so than assets under management.


While there’s been a lot of focus on the lack of succession planning by RIAs, elite advisors in the survey said passing the reins to a successor is a distant event for their own firms. Indeed, 20 percent said their firm didn’t have a formal succession plan.

Even among firms that have a plan, more than a third don’t expect a succession event for at least 10 years and 17 percent don’t foresee a transition for two decades. A little less than 6 percent expected to have a succession event this year.

“The term ‘succession planning’ for many advisors has connotations of giving up control or leaving the business, yet it’s important advisors have a long-term plan, whether that involves selling to a third party or transferring control within their firm,” Dorsey said. “The better framework for this kind of discussion is ‘strategic planning’ and it’s something every firm should be thinking about, regardless of where you are in your firm’s lifecycle.”

Another source of growth is the continuing flow of advisors from broker-dealers to the independent RIA space. This trend, which accelerated in the wake of the financial crisis, is expected to continue and even increase. Nearly 20 percent of the advisors surveyed said they expect to add new talent from independent broker-dealers while 10 percent anticipate adding advisors or teams from the national “wirehouse” brokerages.

Across the industry, there’s been growing interest in “tuck ins,” which lets financial advisors who don’t want to run a business join an existing independent advisory firm, rather than committing to running their own business. Among the elite advisors surveyed, though, 8 percent planned to add teams in this manner while nearly half said they had no interest.

Click here for charts offering a more detailed analysis of the survey responses.

The Elite Summit Survey was conducted by TD Ameritrade Institutional, a division of TD Ameritrade, Inc. Seventy two registered investment advisors (“RIAs”), who attended the TD Ameritrade Institutional 2014 Elite Summit, June 10 -12, participated in an email survey during and shortly after the conference. The attendees, independent RIAs who custody with TD Ameritrade Institutional, were asked to share their views on industry trends, including M&A, succession and recruiting. TD Ameritrade Institutional’s 2014 Elite Summit gathered 190 advisors whose firms, on average, oversee more than $1 billion in assets and include some active acquirers.

About TD Ameritrade Institutional
TD Ameritrade Institutional is a leading provider of comprehensive brokerage and custody services to over 4,500 fee-based, independent registered investment advisors and their clients. Our advanced technology platform, coupled with personal support from our dedicated service teams, allows investment advisors to run their practices more efficiently and effectively while optimizing time with clients. TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.

About TD Ameritrade Holding Corporation
Millions of investors and independent registered investment advisors turn to TD Ameritrade’s (NYSE:AMTD) technology, people and education resources to help make investing and trading easier. Online or over the phone. In a branch or with an independent RIA. First-timer or sophisticated trader. Our clients want to take control, and we help them decide how – bringing Wall Street to Main Street for more than 39 years. An official sponsor of the 2014 and 2016 U.S. Olympic and Paralympic Teams, as well as an official sponsor of the National Football League for the 2014, 2015 and 2016 seasons, TD Ameritrade has time and again been recognized as a leader in investment services. Visit TD Ameritrade’s newsroom or for more information.

Brokerage services provided by TD Ameritrade, Inc., member FINRA ( / SIPC (

1 TD Ameritrade Institutional is a division of TD Ameritrade, Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation.

Source: TD Ameritrade Holding Corporation

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