Jan 8, 2021

RIA M&A 2020 Wrap Up & What to Expect in 2021

looking up in the middle of an intersection of skyscrapers reflecting a sunny, cloudy sky

From small businesses to entertainment to our very freedom of movement and overall health, 2020 wreaked havoc on it all.

But what about M&A in the financial advisory space?

Incredibly, hardly a negative ripple was seen in the yearly numbers, as a quick analysis shows that after the 2nd quarter slowdown, deal activity in the RIA sector continued to march forward at a quick clip.

While for 90% of the country, 2020’s silver lining is difficult to find, the fact is, for the RIA M&A space, the clouds of March and April actually parted to reveal a golden era summer and fall.

That’s evident in the fact that, despite the pandemic, 2020 set a record for RIA mergers and acquisitions.

Why did this happen? Or, perhaps, a more appropriate question would be, “How did it happen?”

First, a recap of 2020.

The year began strong, with 34 transactions in the first quarter alone, matching that of the previous two record-setting quarters that closed out 2019. 1

However, in the face of COVID-19, M&A in the RIA space reflected the apprehension of the greater economy. Deals slowed as both buyers and sellers watched to see how the country would navigate the pandemic and the turbulence in the stock market.

As most would have predicted the slow-down in buying activity, perhaps fewer would have predicted the speed at the rebound in pace. David DeVoe, CEO of DeVoe & Company, in an interview with CityWire, said, “Now that the precious resource of time is becoming more available, we see advisors starting to engage in M&A with greater conviction.”

The third quarter proved to be a very busy one, making up for the second quarter lag with a total of 44 deals; which is an all-time single quarter record for the industry. 2

With the fourth quarter’s totals still being calculated, it seems clear, based on the first three quarters of the year, that the pandemic inspired many RIA principals to pull the trigger on transactions they may have long been considering. Case in point, even with the second quarter’s showing of 22 total transactions, the total number of RIA deals for 2020 will almost certainly set a new record. 2

Through the first three quarters of 2020, there were 111 total deals, placing the record of 132, set just last year in 2019, within reach. When 4th quarter numbers are released in January, it’s quite possible that 2019’s total will easily be bested. 2

What does 2021 look like?

When it comes to RIA M&A activity for 2021, what does the future hold?

In a word, “more.”

The current state of the economy at large, the struggle to recruit new clients in a pandemic age, and the realization that advisors need resources and capital to adapt and endure will most likely continue to lead to the frenzy of deals the industry has seen over the last several years.

Add to all that, the inexorable winds of a decade of change which show that even before COVID-19 – with a stray year here or there where deal totals were static – the number of transactions per year had been steadily increasing since the Great Recession in 2008.

With nearly 30,000 Broker-Dealer and RIA firms in business, the likelihood that M&A activity in 2021 will again set a record is high. More principals will likely consider entering into partnerships where they can create a succession plan that takes care of advisors and staff, take on a larger role at a bigger firm, or perhaps slow down and focus on creating more time with clients and loved ones.

After decades of very little change, well-run advisory firms, with their attractive, repeatable revenue streams and scalability, are desirable to business partners and investors. A possible dark cloud on the horizon could be for those firms whose growth is tied entirely to the market. In the event of a massive market retraction, valuations of firms could be negatively affected and potentially place the survival of vulnerable firms in doubt.

Proactive firms that begin 2021 with a resolution to focus on repeatable, sustainable growth and are constantly refining their near-term and long-term goals, will be in the best position for surviving and thriving during this period of change in the industry.        


1 DeVoe & Company Report
2 Think Advisor Article