The Permanent Role of Private Equity in the RIA Profession

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Even the most casual observer can see that private equity (PE) firms have discovered the registered investment advisor (RIA) profession. Over the last five years, PE firms have been incredibly active acquiring or investing in large RIAs.

Research from Fidelity noted the number of M&A transactions increased by ~400% from 2016 (55) to 2022 (222) with over 60% completed by private capital-backed acquirers. That number includes only reported transactions, with the number of private transactions spiking the number even higher. And according to my firm’s research published in The RIA Deal Room, in 2022 private capital continued to invest in the independent wealth management space and PE-backed RIAs with their partner firms closing multiple acquisitions.

Some may wonder why RIAs are so attractive to PE, given most RIAs that are considered “large” are still small on a relative basis compared to other financial services firms. PE firms have invested in RIAs because the profession is still emerging and larger, fast-growing RIAs have significant upside to scale. Those greater economies and consolidation result in PE-backed RIAs unlocking value that benefits the RIA and its clients.