PLANADVISER - January/February 2021 - 27

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How to best assess an advisory firm's worth
for a merger or an acquisition
THE RETIREMENT PLAN advisory space will consolidate at an increasingly accelerated rate, predicts
Rick Shoff, managing director, advisor group at CAPTRUST in Doylestown, Pennsylvania. Even faster
than it has in the past two or three years? " Big-time, " he responds.
" We're seeing bigger advisory firms now consider being acquired. The story for the next two years
will be that there may be fewer advisory firms acquired, but the ones that do 'tuck in' are going to
be a 'drop-the-mic' moment, " Shoff says. " I do think the retirement space will be fully consolidated
over the next three to five years. "
This year's third quarter saw 55 registered investment adviser (RIA) merger and acquisition
(M&A) deals, up from the temporary lull of 35 deals in the second quarter, according to the " Q3 2020
RIA M&A Deal Report " from Echelon Partners, an M&A advisory firm in Los Angeles that focuses
on investment managers and wealth advisers; its data encompasses both wealth management and
plan advisory RIA practices.
" We saw pretty normal activity in January and most of February, picking up where 2019 left off-and
2019 was a record year for RIA M&A, " Echelon Managing Director Mark Bruno says. " Second-quarter
2020 numbers were low, because many deals were put on hold due to the pandemic and market
volatility. If you think about advisory firms, when there's a major market issue, they're 'all hands on
deck' with their [current] clients. But in May, that bottleneck started to clear, and deals picked up. "
It is hard to pinpoint the deal outlook for the next year or two with certainty, Bruno says, because
of the pandemic's unknown course and ramifications. " But if you take unknown events out of the
mix, we see a strong pipeline of deals. Deals don't happen overnight: It's a six-to-18-month process,
so you do have a pretty good visibility into the future, " he says. " And there's a ton of interest in
buying $1 billion-plus [in asset-under-management (AUM)] RIA firms. "
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PLANADVISER - January/February 2021

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