RIA consolidators have grown significantly over the past decade and now represent $1.5 trillion in assets under management (AUM), according to “The Cerulli Report—U.S. RIA Marketplace 2024.”
The market opportunity that has been created as a result of this trend has changed the dynamics not only for RIAs, but also for asset managers and other strategic partners, Cerulli said.
Cerulli points out that, in 2018, only 6% of advisors in the RIA channels were affiliated with a consolidator, a number that grew to 14% by 2023, while asset market share growth reached 18%, an increase of 10%.
RIA consolidators have been able to “maximize” this growth period by building platforms appealing to advisors’ needs, while “driving the goals of a larger, integrated organization forward,” Cerulli said in a news release.
As an example, Cerulli points out research showing technology has become a key component of RIA consolidator offerings to advisory firms they plan to acquire. According to Cerulli’s findings, 55% of advisors said an integrated technology platform was among the most valued services that consolidators offered.
“By plugging their advisors into a single system of record, firms can seek better efficiencies in integration and a greater overall picture of their business.”
– Stephen Caruso, Associate Director, Cerulli
“Fundamental to RIAs’ needs, technology tools have become a costly and complex component of advisory practices,” according to Stephen Caruso, Associate Director at Cerulli.
“Many consolidators have successfully constructed centralized technology platforms that give advisors access to a best-of-breed technology stack where internal technology teams manage the tools,” Caruso said. “By plugging their advisors into a single system of record, firms can seek better efficiencies in integration and a greater overall picture of their business.”
Succession planning is also valued by 50% of survey respondents, Cerulli said.
According to Cerulli, 37% of RIA advisors plan to retire over the next decade, meaning 35% of RIA channel assets could be transferred.
“RIA buyers have made significant inroads into this market, positioning themselves as a buttress to advisor practices and RIAs that understand they need an exit strategy,” Cerulli said.
Across RIAs surveyed, 74% considered succession planning or exit strategies as a factor influencing their decision to join a large RIA platform or aggregator, according to Cerulli.
“As this wave of consolidation rolls across the industry, advisors will be increasingly confronted by opportunities to sell their business or affiliate with a large RIA acquirer,” Caruso said.
“RIA acquirers looking to differentiate themselves can do so by building a stronger framework of opportunity around the advisor,” he noted.
But he added, “Balancing operational improvements with a loss of individuality can be difficult, and the value proposition must be readily apparent.”
In 2023, RIA consolidators reached “new heights [and] significant growth opportunities,” according to an executive summary of the report. “The current wave of M&A has created a rapid acquisition environment, giving acquirers a strong competitive position and a broad base from which to expand. With centralization at the forefront, consolidators need to convey their long-term value to acquisition targets.”
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jberman@wealthsolutionsreport.com.
