PLANADVISER - May/June 2019 - 24

recently published " 2018 Wealth Management M&A Transaction
Report, " which analyzed merger and acquisition
activity in the financial advisory space over the past year.
According to the report, 2018 transaction numbers were
actually down compared with 2017 figures-although
assets in motion were up.
In all, Fidelity says, there were 95 transactions, totaling
$563.4 billion. This figure is down 13% from 2017, but that
number hides the fact that the assets transacted more than
doubled-up from 2017's $265.5 billion-across the registered
investment adviser (RIA) and independent broker/
dealer (B/D) channels. At year's end,
RIAs accounted for 87 of the 95 wealth
management transactions.
When comparing findings from
the last few years, Fidelity discovered
that " strategic acquirer models " have
come to the fore in RIA transactions.
These are increasingly capitalized
by private equity and continue to
drive the majority of M&A activity.
Indeed, Fidelity says, strategic
acquirers accounted for 68% of RIA
buyers last year.
" Overall, but particularly in the
RIA space, 2018 was a seller's market, "
Fidelity says.
Shoff says there has indeed been
substantial talk over the years about
consolidation in the adviser space, and,
from where he sits, that is " definitely
starting to accelerate in a real way. "
" We still have to go out and earn
provide, in order to reinforce their relationship with sponsors
and participants. These RIAs are generally compensated
with a fee for one-on-one advice or, perhaps, through
a financial wellness fee, under either of which arrangement
they counsel participants about 529 plans.
Adding 529s can bolster advisers' engagement with
" Advisers
are getting
older, frankly.
So there are
many reasons
we believe the
pace of M&A
activity will
pick up even
more. "
this business, scratching it out of the
dirt, as they say. But there is no doubt
that it's getting harder to be fully
independent, because there is growing complexity in this
business and clients are demanding so much more, " he says.
Moreover, " advisers are getting older, frankly. So there are
many reasons we believe the pace of M&A activity will pick
up even more. "
As Shoff observes, the motivation for why institutional
firms may want to bring on wealth management expertise
and start to build out that type of client service infrastructure
is baked into the aging demographic trends of the U.S.
and the fact that DC plan assets have grown exponentially
in recent decades.
More Services Are Expected
Apart from retirement plan advisers moving into the
areas of private wealth management and also HSAs,
firms are finding ways to support clients via 529 college
savings accounts.
While the direct
revenue opportunities in 529 plan
services may be limited to broker/dealers and asset
managers rather than RIAs, a number of RIA retirement
plan advisers have already added 529s to the services they
both the plan sponsor and participants, says Peg Creonte,
senior vice president of business development for Ascensus'
government savings division in Newton, Massachusetts.
Certainly, while some advisers view offering 529 plan
services as a complementary service, there are those who
see such a high take-up rate of 529
plans among participants that they
consider them an important offering
(see " Educating Is Important With
529s, " page 18).
Essex Financial, an RIA firm in
Essex, Connecticut, began offering the
service eight years ago. James Sullivan,
vice president, says advising on the
plans, for which he increases his fee
by 50 basis points (bps), " is more of a
value-add than a true revenue generator.
I do it to help solidify the relationship
with the plan and the participants
rather than as opportunistic
cross-selling. "
Jerry Ripperger, vice president
of consulting at Principal Financial
Group in Des Moines, Iowa, points
to a further, far less explored potential
service: employee stock ownership
plans (ESOPs). He says his firm
encourages plan sponsors to offer an
ESOP to complement their 401(k).
" Often, an ESOP is set up without
plan sponsors understanding how to wrap it with their
total retirement program, " Ripperger says, noting that the
adviser can come in with a holistic plan design to help both
employers and employees meet their goals. " The adviser
should be front and center, driving the whole retirement
plan strategy, " he adds.
According to Mark Kossow, a member at Clark Hill law
firm in Princeton, New Jersey, whose practice focuses on
ESOPs, to begin a client company's transition to employee
ownership, the adviser brings in two attorneys-one for
the plan sponsor and one for the ESOP. ESOPs also need
an independent trustee that has control over assets and
considers buys and sells, as well as an appraiser that works
with the trustee to determine the fair market value of the
employer's stock. In addition, a third-party administrator
(TPA) or recordkeeper determines benefit allocations to
participants and beneficiaries after the ESOP transaction
has been made.
" Plan advisers can help with the selection of all of these
parties, " Kossow says. " Advisers may also provide employee
communications to explain how the ESOP works. "
24 | planadviser.com May-June 2019
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