Lack of in-person meetings and the general suppression of business activity hit M&A in the RIA and independent broker-dealer corner of the wealth management ecosphere during April, figures show.

Fresh data – this time from Fidelity Investments - unsurprisingly shows that mergers and acquisitions among registered investment advisors slowed in April because of the COVID-19 sledgehammer to economic activity. 

There were three RIA transactions representing $1.4 billion client assets and one broker-dealer acquisition by LPL Financial last month, the US investments house said in a statement. 

The firms involved in the deals were Exencial Wealth Advisors (buying Willingdon Wealth Management); Allworth Financial (Houston Asset Management); Creative Planning (Coe Financial Services), and LPL Financial (Lucia Securities).

Together, March and April were the lowest for assets under management involved in RIA deals for two straight months since Fidelity began tracking such M&A activity in 2016. Year-to-date, the number of RIA deals has slumped by 38 per cent and AuM is down by 33 per cent compared with the same period in 2019. On the broker-dealer side, client assets are down from $391.0 billion and six deals to $1.5 billion and one deal.

Recent figures from investment banking and advisory house ECHELON Partners said that dealflow had fallen for similar reasons.

Underlying forces driving M&A haven’t vanished, however. A number of RIAs are owned by people nearing retirement age and looking to exit the business; rising regulatory costs force more focus on winning economies of scale to afford the tech upgrades and other changes to remain profitable. 

Fidelity Investments said “serial buyers and bankers indicate that M&A interest remains high with both buyers and sellers and that discussions and due diligence continue forward. However, cultural fit and face-to-face interaction are critical to deal-making, which means negotiations in a time of virtual engagement could lead to limited activity in the second quarter.”

The firm’s report noted that there have been a number of strategic minority investments. Those transactions include Emigrant Partner’s investments in Stratos Wealth Partners and Parallel Advisors, as well as Mariner Wealth Advisor’s stake in Dynasty Financial Partners to form a new entity, Mariner Platform Solutions*. 

In February, before the US state lockdowns kicked in, Morgan Stanley said that it would be acquiring E*TRADE for $13 billion, which easily made it the largest deal of the first quarter. Morgan Stanley will absorb E*TRADE’s $360 billion in AuM, which includes $19 billion under management in the company’s RIA custody division.