Many more retirement plan advisory firms are expected to put their firms up for sale, marking what some say might be a watershed year in deal-making with larger, better capitalized "aggregator" firms.
"2019 was really the first big year in acquisitions in the retirement advisory space," said Dick Darian, the Charleston, S.C.-based CEO of retirement M&A consulting firm Wise Rhino Group. "I think you're going to see that continue into 2020."
Mr. Darian was involved in some 17 transactions in 2019, a number that he anticipates will double this year, with several expected to close by the end of June. The sellers in last year's transactions collectively represented more than $55 billion in assets under advisement and had revenues ranging from $2 million to $9 million, he said.
In addition, the firm was engaged in more than 30 firm assessments last year, "a leading indicator," Mr. Darian said, of projected merger and acquisition activity. "We're being hired by many. It's off the charts," he said. "We've got a significant pipeline of assessments that are going to lead to market searches that will lead to mergers."
Besieged by escalating technology and client demands, rising regulatory constraints and relentless fee pressure, many firms are realizing that they can no longer survive on their own. They need the scale, resources and capital of larger organizations to help them grow.
With aggregator firms like CAPTRUST Financial Advisors and Hub International Ltd. scooping up ever more firms and bulking up in size, smaller firms are getting further left behind. "The bigger they get, the harder it is for a smaller unscaled firm to compete on price and services," Mr. Darian said, referring to acquisitive zeal of aggregator firms.
Hub International was by far the most aggressive aggregator last year, picking up nine firms, including Global Retirement Partners, a $40 registered investment adviser through which many of the firms Hub bought cleared their transactions. In addition, Hub purchased two large insurance-related companies — The Insurance Exchange Inc. and SilverStone Group — both of which had significant retirement plan businesses.
Hub expects an equally active 2020. "We anticipate 2020 will look similar to 2019 with up to 10 or so acquisitions," said David Reich, the San Diego-based national president of Hub retirement and private wealth.