Despite a third-quarter slowdown, RIA dealmaking continues its strong pace, bringing compliance challenges that can persist long after closing. Buyers and sellers must scrutinize compliance issues related to transactions and post-closing integration. Each party needs to address topics like recordkeeping, client fees, advisor compensation, disclosures and custody arrangements.
The SEC’s Division of Examinations included advisors involved in mergers, consolidations or acquisitions among its fiscal 2026 examination priorities, citing the operational and compliance complexities and new conflicts of interest these transactions can create.
WSR spoke with experts with legal, regulatory and technology backgrounds to understand the risks and how AI can help. The overall consensus is that M&A can create unique situations that could challenge the regulatory and compliance systems of both buyers and sellers.
“Anything that can put an individual’s compensation ahead of their clients or the firm is problematic and should be monitored closely,” said Sander Ressler, Co-Owner and Managing Director at Essential Edge Compliance Outsourcing Services. “Establishing clear and precise terms for each key person in an acquisition is vital. Most deceptive practices can’t be predicted but ensuring that the contractual basis for on-going behavior protects the firm and its clients is a necessity.”
Fortunately, advances in AI tools can help buyers and sellers better manage compliance issues as the two sides complete the deal and combine tech stacks. Specifically, AI can monitor multiple information streams and spot potential problems.
“AI can maintain continuous trade and communications surveillance across both firms’ systems, flagging unusual activity when staff attention shifts to the deal,” said Chris Mills, Head of Wealth Solutions at Feathery. “It can detect deal-related MNPI (Material Non-Public Information) in emails and chats and monitor personal trading by insiders. And it can automatically capture, index, and migrate required records, verifying nothing is lost as systems consolidate.”
Overlooked Issues
Experts say there’s often a gap between what an RIA says it does and what it actually does.
“A frequent blind spot is the gap between written policies and actual practices,” said Kaitlyn Wulfken, Editor in Chief of Regulatory Content and Director of Regulatory Research at CRC Oyster. “Legacy billing errors, undisclosed conflicts, incomplete records, performance advertising issues, and informal custody arrangements can survive a transaction. Buyers can also underestimate client consent requirements and the compliance capacity needed to oversee a larger, more complex business.”
Mario Chilin, Managing Director, Compliance and Risk at EP Wealth, agrees.
“The most overlooked risks are often operational: inconsistent disclosures, legacy compensation arrangements, outside business activities, books-and-records gaps, cybersecurity practices and differences between written policies and actual practices,” Chilin said. “Those issues can become more significant after closing if they are not identified early and incorporated into the integration plan.”
Ressler believes that RIAs could benefit from outside expertise so issues don’t escape scrutiny.
“Many firms rely on internal testing rather than using an external independent party that specializes in advisory firms,” he said. “Internal compliance or audit personnel may be too familiar with the firm and/or not possess the greater knowledge of an industry consultant that causes the buyer to overlook potential compliance issues.”
Buyer Beware
Ressler identifies culture as buyers’ first compliance due-diligence priority. Buyers also need to determine whether a firm’s daily operations reflect its stated policies and whether compliance executives and staff have the authority and resources to perform their duties.
“Buyers should be wary of a firm that does not value the compliance department as a partner in building the business,” Ressler said. Frequent overrides of compliance personnel by senior managers may signal buried problems that emerge after purchase, he added.
“Buyers should test how the program operates: sample fee calculations, review client agreements, examine custody practices and trace prior examination findings through remediation,” Wulfken said. She also recommended assessing the chief compliance officer’s authority, resources and access to management. “A clean disclosure document or polished manual provides limited comfort without evidence that controls work in practice.”
“Buyers should focus on whether the firm’s compliance program reflects how the business actually operates,” Chilin said. “That includes regulatory history, disclosures, conflicts, advisory agreements, fee billing, marketing, custody, cybersecurity and employee activities. The objective is to identify issues that may create regulatory exposure or complicate integration after closing.”
Seller Beware
Sellers need to proactively address things like client disputes and legal risks before buyers discover these problems on their own.
“Any issues pertaining to regulation and litigation,” Ressler said. “Having issues in either of these areas may be a signal that the issues requiring fixing may be deep and pervasive. Legal and litigation costs are often significantly underestimated in an acquisition especially when there are outstanding issues present in the due diligence.”
Said Wulfken: “Prioritize issues affecting clients, including overcharges, undisclosed conflicts, and custody gaps. Document corrective action and testing. Buyers need to understand both what went wrong and whether the fix was appropriate (and if it has held).”
Standard Compliance
The buyer will eventually want to standardize compliance operations and policies. But they must carefully do so, taking into account how the seller previously managed such matters.
“Broader standardization should follow a documented, risk-based schedule that reflects the acquired firm’s business,” Wulfken said. “Moving everyone onto one manual does little if systems, workflows, training, and supervision still operate differently.”
Buyers should establish immediate oversight of higher-risk areas while following a documented transition plan for broader integration.
“Integration should begin promptly, but the timeline should be risk-based rather than purely administrative,” Chilin said. “Buyers should establish immediate oversight of higher-risk areas, clearly assign compliance responsibilities and develop a documented transition plan. Full standardization can then occur in an orderly manner without creating new risks through an overly rushed conversion.”
Conflict Of Interest
Experts say deals can reveal conflicts of interest related to the financial motivations of buyers and sellers. Both sides need to ensure that compliance programs protect the interests of clients.
“Earnouts tied to revenue or assets can incentivize asset retention, additional sales, or fee increases,” Wulfken said. “Retention packages can influence recommendations to move clients onto the buyer’s platform. New ownership can introduce affiliated products or services. Firms should assess these incentives, provide specific disclosures, and monitor their effect on advice.”
Said Chilin: “Transaction terms can create incentives that affect recommendations, referrals, employee retention or client communications. Earn-outs, equity arrangements and retention awards may create financial interests that require careful evaluation. Firms should identify those conflicts, determine whether disclosure or mitigation is appropriate, and ensure client interests remain central throughout the transition.”
AI: During M&A
AI technology can help buyers and sellers better manage compliance as both sides work to complete the deal. Such systems can act as the eyes and ears for both sides to identify potential problems as they emerge.
“AI can read far more of the target’s record than a sample can: client agreements, marketing, trade records and ADV disclosures,” said Sid Yenamandra, Founder and CEO of SurgeONE.ai. “It points to missing documents, possible conflicts and policies that need updating, and experienced professionals review what it finds. You understand what you’re taking on before you sign.”
Sindhu Joseph, CEO and Co-Founder of CogniCor, said AI can be especially useful in cases where the technology of the buyer and seller doesn’t communicate easily.
“Firms buying smaller RIAs keep hitting the same problem: old, mismatched technology that doesn’t talk to their systems,” Joseph said. “That’s where compliance gaps open up and work slows down. AI can sit on top of every platform, old and new, and see across all of them. The result: fewer errors, the same rules applied everywhere and less risk during integration.”
AI: After M&A
“AI can reconcile billing across both firms’ systems, flagging mismatched fee schedules, lost breakpoints, and double billing before invoices go out,” Mills said. “It can compare Form ADV, Form CRS, and marketing materials against actual post-close practices to catch stale disclosures. And it can identify accounts still missing consent or new agreements, automating outreach and blocking billing until paperwork is complete.”
Said Michael Wood, CEO of Domify: “AI can help firms consolidate data from a variety of advisor-facing, operational and compliance systems, giving compliance teams a more complete, real-time view of activity across the firm. At Domify, we’ve seen firms use that broader visibility to eliminate acquisition-related blind spots, align compliance policies, and surface emerging risks before they become larger problems.”
AI: During And After M&A
AI’s ultimate value is that it keeps compliance on track even as the seller’s technology transitions to that of the buyer, Joseph said.
“Firms buy other firms to grow, but the acquired firm’s technology rarely fits right away, and replacing it can take months,” she said. “AI doesn’t have to wait. By looking across both firms’ systems at once, it keeps compliance on the same rules from the first day through the final handoff. Clients stay well served and nothing falls through the cracks.”
Said Wood: “Deployed correctly, AI systems can help reconcile mismatched compliance procedures, surface discrepancies and create a uniform set of standards across the newly combined firm. They can look across upstream systems and formats, reducing silos and absorbing new schemas while the firm moves from the old way of doing things to the new, with the compliance team firmly in control.”
“Deals are busy, and routine work can slip,” Yenamandra said. “AI can keep communications review, surveillance and deadline tracking moving and document each step as it happens, so the record stays complete. It supports your compliance team. People still make the calls.”
Thomas Lee, Senior Editor and Staff Writer for Wealth Solutions Report, can be reached at thomas.lee@wealthsolutionsreport.com.
