M&A Frenzy: The Laws of Attraction - The most successful RIAs tend to be the most acquisitive. Eight steps to take your firm to the next level ...
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M&A Frenzy:
The Laws of Attraction
The most successful RIAs tend to be the most acquisitive.
Eight steps to take your firm to the next level.
A SPECIAL REPORT FOR ADVISORS | OCTOBER 2021
2
First, a note...
Dear Advisors,
It’s no secret that the independent advisory business is undergoing massive change,
but that doesn’t make the statistics any less startling.
DeVoe & Company’s RIA Deal Book for the fourth quarter of 2020 noted that last year
was the seventh consecutive year of record M&A activity, with 159 individual transac-
tions. Echelon Partners, in its 2020 RIA M&A Deal Report, pegs the second half of 2020
as “by far the most active period in the history of the industry.”
According to Fidelity’s most recent Quarterly M&A Review, deal volume leveled off
somewhat for the first half of 2021, with 35 deals representing $40.9 billion in AUM in
the second quarter of 2021. “Though not a record,” the report notes, “Q2 still represents
a steady rise in M&A activity that has been in motion for several years.” Fidelity says
annual deal volume rose 58%, from 83 deals to 131 deals, in the period spanning 2018
to 2020. The represented AUM grew 69%, from $108.7 billion to $183.5 billion.
In the midst of this activity, Barron’s surveyed about 200 of the nation’s best independent
advisory firms as part of its 2021 Top 100 RIA Firms ranking project. This intelligence
report takes a closer look at that rankings data, paying particular attention to the 42
firms who have submitted in each of the last four years. In aggregate, these 42 firms have
$1.6 trillion in AUM (47% of which resides with individuals and families, as opposed to
institutions.) In the year ending June 30, 2021, these firms together acquired 57 practices,
with a combined AUM of $51.2 billion.
As you’d expect, the best firms are accounting for an outsized share of the industry’s
M&A activity, and we’ve supplemented details about these firms with practical, action-
able advice from Ray Sclafani, CEO of Barron’s advisory-coaching partner, ClientWise.
In addition, this report features Q&As with two of the nation’s best RIAs, Patti Brennan
of Key Financial and Marty Bicknell of Mariner Wealth Advisors. Brennan’s is a $1.8
billion firm that is committed to independence and growing organically; Bicknell’s
Mariner, at $58 billion, has a reputation as a discerning and savvy player in the
M&A market, among other strengths.
This report is the first time we’ve dipped into our rankings data to deliver specific
insights around the RIA market. We’d love to hear your thoughts on this effort, as well
as suggestions and requests for insights we can deliver in the future. Please feel free to
drop us a line at advisor.editors@barrons.com.
Thanks, and please stay in touch.
Greg Bartalos
Editor-in-Chief, Barron’s Wealth & Asset Management
1
Key
Findings
FROM BARRON’S EXCLUSIVE DATA
ON 42 OF THE TOP RIA FIRMS
1
The big are
getting bigger
AUM growth at the best firms is soaring,
bolstered by both M&A and organic
client acquisition
22 Scale is starting
to take hold
One important sign: firms are able to
handle more clients with the same staff
3
Revenue is up
But not as steeply as AUM
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What’s happening
Assets are growing at a fevered
rate at the top firms. Organic
growth—through market gains and
organic client additions—are a factor
here, but M&A activity is the over-
What to do
Advice from ClientWise
Evaluate growth
Growth should be intentional and
planned. It should be sustainable,
and it should be profitable. The first
your various profitability targets,
including EBITDA and professional
staff expenses. Carefully manage
capacity, and know your revenue
per professional and revenue per
client measures. Finally, keep an eye
on what your service model deliver-
1
Insight
whelming driver. The 42 firms that step in growing is to decide how ables are, as well as what promises
submitted data for every Barron’s quickly you want to expand, and you’re making to clients and who
Top RIA Firms ranking since 2018 why. Next, determine whether the will be tasked with delivering on
accounted for 57 acquisitions in the growth your firm has experienced those promises.
year ending June 30, 2021, or about is in line, behind, or ahead of your
one-third of all M&A transactions five-year strategic growth approach. Create a five-year plan “Growth
in that time frame. That translates Some questions to ask: What does As an advisory practice scales, should be
into a 95% increase in assets in that your ideal client look like and what it needs to make thoughtful, strate-
group since 2018, compared to an is the best way to acquire them? gic investments that ensure a high intentional
average asset-growth rate of just What percentage of growth comes level of client care, while simultane- and planned.
33% industry wide. from existing clients, and is there a ously driving enterprise value and
way to expand that? How does your protecting the business’ margin. It should
Not all firms are going to participate practice attract new clients? M&A Using benchmarks for profitability be sustain-
B:11"
S:11"
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able, and it
as aggressively in the M&A market can be an attractive means to grow, targets, professional staff expenses
as these top firms. However, the but only if the combining firms are a and operating expenses is key.
scale the best firms are building is good fit operationally and culturally. A quick guideline: should be
creating a competitive environment
that requires all independent advi- Grow with intention
100% Gross revenue = profitable.”
[40% Professional staff expenses]
sory shops to map out how they’re Take care to manage cash wisely, + [30% Operating expenses]
going to compete in areas like ser- make investments strategically, and + [30% Profit]
vice offerings, pricing, technology, make hires that will measurably
research It’s
and this very question that,enhance enterprise value. Know
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AUM EXPLOSION
Combined assets-under-management data from 42 firms that submitted for each Barron’s Top RIA Firms ranking
since 2018
1,600
n Overall AUM
n Private Wealth AUM
$ billion
800
0
2018 2019 2020 2021
All data as of June 30, 2021.
52 Insight
What’s happening
Staffing figures provide another
window into how aggressively the
best RIAs are growing and how
Scale starts to take hold
PULLING MORE WEIGHT
Clients-per-advisor data from 42 firms that submitted for each Barron’s Top RIA Firms ranking
since 2018.
68
n Clients per advisor (avg)
the effects of scale are starting to n Change in clients per advisor (avg) 9.1%
take hold. The group of 42 firms
participating in Barron’s rankings
grew their staffing by 46% over the 2020-21
last three years—from 8,327 total 4.8%
employees in 2018 to 12,124 this
60
year. At the same time, the number
of offices grew by around 50%, to 2019-20
an average of 21 offices per firm. -1.0%
Overall staffing levels more or
less kept pace with the number of 2018-19
clients, but an interesting point
emerges when the staffing data
52
gets cut more finely. Specifically, 2018 2019 2020 2021
the average number of clients per
advisor has risen by 14%, from 59 in All data as of June 30, 2021.
2018 to 67 this year. This suggests
that scale is allowing firms to lean
more heavily on support staff, rather professionals who will ultimately vice and service, every single client
than advisors, for client service and drive value for clients, which in turn ends up getting the most compre-
relationship building. If this trend will drive the value of the firm. hensive service offering the firm has
continues, the challenge ahead will to offer. It’s just not scalable, it won’t
be ensuring clients continue to feel Measure productivity and be profitable, and often leads to poor
special and supported, even if capacity service and underdelivering on the
their day-to-day interaction with First, identify the revenue-per-pro- clients who expect your best service.
advisors wanes over time. fessional number on your team. Define your service segments and
Then, take a closer look at the stick to them.
What to do
“Define revenue per client, per professional.
What benchmark are you using to Co-create career development
Advice from ClientWise your service determine how many clients each plans for every staff member
segments professional has the capacity to Your greatest assets are your people.
Hire for enterprise value serve? And how much time do you Invest wisely. More than ever, em-
Advisors often hire late, after the and stick want each professional spending ployees want a clear understanding
fact. The team is buried and burnt to them.” on advising clients, generating of their role, their responsibilities,
out; attention to new opportunities new business, and leading within and a vision of their future. Co-cre-
outweighs the focus on serving the firm? Next, take a close look at ate a professional development plan
existing clients; the practice leader is the service levels you are provid- with each employee. Focus on your
so busy working in the business that ing to various client segments. It future company. Find out what
there’s not enough time to work on goes without saying that a practice experiences and skills each employ-
the business. Instead, consider hir- cannot provide the same service ee will need to be of greater value to
ing for where you want the business offering to a client who generates themselves and the clients. Create
to go. Thoughtful, strategic, planned $5,000 in revenue as it does for one a mentorship program so that each
growth allows for recruiting, on- who accounts for $25,000. Yet many employee has someone to offer
boarding, training and developing firms still suffer from service creep. advice and career guidance.
In the spirit of providing great ad-
6Revenue rising
What’s happening
As AUM at the top firms has grown,
revenue has as well, but not nearly
as aggressively. For the three years
that Barron’s gathered revenue
data (2019-2021), the group of 42
PLAYING CATCH UP
Return-on-assets data from 42 firms that submitted for each Barron’s Top
RIA Firms ranking since 2018.
15%
18.9%
3
Insight
firms grew their collective AUM by 14.8%
54.5%. Meanwhile, revenue grew
by 41.9%. (These numbers are for
private-wealth relationships—indi-
6.7%
viduals and families only; institu-
tional AUM and revenue have been
0
stripped out.) 2020
Some of this gap could be a report-
ing lag. In the year ending June 2021 n Change in revenue (avg)
alone, combined private-wealth n Change in ROA (avg)
AUM at the 42 firms grew 45.4% to –13.0%
$729.3 billion, and revenue num- 2021
-15
bers might well catch up as the
firms digest their acquisitions more
thoroughly. Until that happens, the All data as of June 30, 2021.
industry has an interesting re-
turn-on-assets trend in the making.
In the year ending June 30, 2020,
ROA grew 6.7%. Meanwhile, ROA What to do expense of running an independent “The best in
for the year this past June dropped
13%. Average ROA for the 42 firms
Advice from ClientWise advisory business is on the rise in
many areas, from compliance to
the business
currently sits at 58 basis points. Evaluate your fee structure, technology to human capital. Pro- restack and
Another telling metric, revenue per
client household, also exhibits slow-
pricing model
As advisors have striven to im-
tecting the margin is paramount in
preparing for future profitability.
re-segment
ing growth. Through June 2020, it prove their levels of client service, their client
grew 3.5%, but that growth slowed one challenge they face is resetting Resegment your client roster base every
last year to 2.8%. fees appropriately. If a practice is The best in the business restack and
devoting more staff and resources re-segment their client base every six months.”
The industry’s consolidation is still to client service, a reevaluation of six months. Such moves typically
likely in its early stages, and the fee structure and pricing is a must. include rotating multiple staff mem-
challenge for firms growing through In addition to examining fee levels, bers to new clients, which creates
M&A and for those who have to it’s also useful to consider structure. much-needed redundancy and
compete with them is to staff and For instance, while many advisors backup and broadens client connec-
price their services in a way that charge a fee rooted in assets under tions. As advisory practices focus
will deliver maximum client value, management, many are adding more on high-end service models,
while also supporting ongoing retainer fees in certain circumstanc- clients are learning to expect more.
profitability. es. In setting fees make sure to place An advisor’s fee should reflect the
the cost of running the business delivery of additional value in an
front-and-center in your consider- environment where inflation is real.
ations. Though fee compression can To hit your profit targets, pay close
be an issue, margin compression is a attention to both the top line and the
greater threat to most practices. The bottom line.
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Always-On Acquisition Strategic Scale
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property of their respective companies. American Funds Distributors, Inc., member FINRA.UP CLOSE
Patti Brennan
KEY FINANCIAL | WEST CHESTER, PA
BY KAREN HUBE
BA: What’s one of the Do you continue this kind Do you have a
most important lessons of goal setting? succession plan?
you’ve learned about Since then, my team has set If something happens to me,
managing a practice? a new goal every year. This clients need to know everything
One person can make a differ- year, our goal was $120 million will continue seamlessly. The
ence, but a team can make a and we hit it in July, and our way this works is I’m Colonel
miracle. We really started retention rate is 99%. The year Sanders. My face is on the side
to accelerate growth when the firm hit $1 billion in AUM— of the bucket, but I stopped
I realized I could delegate. three years ago—I treated the making the chicken a long time
P
After launching my practice team to a trip to Jamaica. ago. While I’m accountable
atti Brennan, in 1990, I went for 20 years and I invented the recipe, these
president and CEO being everything to everybody Have you had are the people—my team—who
of Key Financial, before I learned—it took me a growing pains? are making the chicken. To me
started her career as long time—that I only needed As we grew, the question was, it’s so much fun that I don’t see
an intensive care nurse, but to be all things to my team, and how can we maintain quality myself retiring anytime soon.
insists the change to wealth I could let them provide the of service and advice? How
management wasn’t a big service and touches to clients. do we do year-end planning, What’s your approach
leap because the mindset is keep track of who is a candidate to the mergers and
the same: “As a nurse, I had Can you share an anecdote for a Roth conversion, etc. The acquisitions trend?
to know everything about that of how teamwork has answer is technology. You have I’m stubborn. We have worked
person’s health to know what spurred growth? to have systems in place. We so hard with our process and
was best for them,” says the Seven years ago, I was at a automated everything possible technology to be absorbed by
West Chester, Pennsylvania- conference and a woman told and developed systems to track a larger entity. I don’t see that
based advisor. “Now I have to me she brought in $50 million everything from the first phone happening in the near term.
be just as efficient and effective in new money. I shared the call with a client to financial
in understanding client needs.” conversation in a firm meeting. plans and relationship building. What’s your view on
A major challenge has been We were averaging $25 million the market?
doing so while growing rapidly: to $30 million in new money A couple of years ago I hired We are in a secular bull market.
Brennan manages a team of a year. Someone said, “If she an engineer who is a phenom at Pullbacks are inevitable, but
30 and nearly $1.8 billion can do $50 million, we can.” coding. Now I have an executive with yields this low, money is
in assets—almost triple the dashboard that pulls in all of going to go to the stock market.
$620 million she managed We set the goal, but I said we our different systems. I know The hardest thing is fixed
five years ago. can’t grow for growth’s sake; exactly how many calls we’re income and I don’t want to
we have to take care of clients— getting, how many appoint- take a lot of risk in that area.
my bar is a 98% retention rate. ments we get from the calls, I’m okay with cash that’s an
We had a white board and every where we are with new money, asset class and there’s a lot to
week we posted retention and the status of financial plans. be said about the guarantee.
new money. The first year, we Notes from the CRM system I like international. People are
brought in $63 million with a get posted there. Everyone almost forgetting there are great
98% retention rate. The team has access to it. We all know opportunities over there, even
did not know that they were exactly where we stand with though it doesn’t provide the
going to get a bonus based on clients. Nothing falls through diversification it used to.
the new money. It didn’t matter the cracks.
if you answered the phone or
had an MBA, everyone got
the same bonus.
9UP CLOSE
Marty Bicknell
MARINER WEALTH ADVISORS | OVERLAND PARK, KS
BY KAREN HUBE
M
arty Bicknell, CEO and president of Mariner Wealth Advisors,
has been riding the M&A wave since it began gathering
momentum ten years ago. The Overland Park, Kansas-based
firm has acquired 30 practices ranging in size from $300 million
in AUM to $5 billion. Its recent deal for AdvicePeriod brings together a
pair of former Barron’s Top 100 Independent Advisors—Bicknell and
AdvicePeriod founder, Steve Lockshin. Including eight deals finalizing in
late September, Mariner has 500 advisors in 60 locations, up from 100
advisors in 20 offices five years ago. Assets under advisement have grown to
$58 billion, up from $15 billion.
BA: How do you determine wearing multiple hats, so we try to successful acquisition took years
if a firm is a good fit? remove the non-client facing hats so to get from start to finish.
When we think about an acquisi- the focus can go entirely to the client.
tion it’s a talent acquisition strategy We have a team of four individuals Where is tech innovation still
rather than an AUM grab. You can who escort our acquisitions through falling short in the RIA space?
look at a spreadsheet and get a the onboarding process. They are the The tools that touch the client are
black-and-white answer, but we bridge between the acquisition team getting a lot of attention. But one of
focus on the individuals inside and all departments—operations, the gaps is in the back office. If you
an organization. We’re looking for finance, technology, compliance. think about wirehouses, they have
firms that have the desire to expand one system. RIAs have an account
“One thing beyond just an investment focus. How important is culture -ing system, a compliance system,
Investments are extremely important assimilation? reporting performance system,
I tell the but they’re a component of our value We spend a lot of time talking about financial planning software system.
entire orga- proposition. For example, through culture. Our culture is to make sure None of these things integrate together
targeted acquisitions we have built everyone realizes their job is about the well. Is it on the horizon? I hope it is.
nization as our own in-house tax department client and about each other being
frequently with 115 people who do 8,000 good teammates and helping every- Where are your biggest invest-
as I can is tax returns a year and a boutique
investment bank for closely held
body perform better. One thing I tell
the entire organization as frequently
ments in your practice?
I don’t want anyone to think
that culture business owners. By recruiting as I can is that culture is top down, technology isn’t important, but
is top down, talent, we built our own trust
company and an insurance offering.
but policing it is bottom up. I view it
as everyone’s responsibility to raise
our most significant expense is our
people—retaining, attracting and
but policing their hand if they see something that training talent. The best way to focus
it is bottom How do you handle integrating
a new practice?
doesn’t fit with our culture. We can’t
fix something we don’t know about.
on the client is to put the attention
on the advisor. We surround them
up.” We have a corny way of looking with tools and resources to elevate
at things: You’re on stage, and the What are the positives and the client experience. We have a team
front of the curtain is everything negatives of the RIA M&A trend? of 50 business development officers
that touches the client. We’re not It’s no secret the RIA community is responsible for driving clients to
trying to turn everything into a aging, and about 90% of RIA firms our advisors.
McDonald’s or a Starbucks, so we are below $1 billion. Consolidation
don’t mess with that. Backstage is allows for the next generation to When you founded Mariner
where we integrate so that we have continuously serve the client. There 15 years ago, was it your
one back-office system, one reporting are a lot of firms north of $5 billion vision to expand to become
system, one CRM. Scale is definitely that can bring resources smaller a nationwide firm?
a part of that but more than that firms don’t have. Consolidation also Not in our wildest dreams. Our only
it’s for efficiency. If advisors have drives innovation. What’s negative purpose was to create a firm that
responsibilities that aren’t client- is the pace. We’re seeing acquisitions puts the client first, advisors second
facing activities, that means they’re happening in 90 days now. Our most and shareholders last.
10Report Consultant: Ray Sclafani, ClientWise (Barron’s exclusive advisor-coaching partner).
Contact ClientWise to learn more about how they collaborate with advisory firms and firm leaders.
800-732-0876
info@clientwise.com
Sophia Harbas, Director of Coaching
Ray Sclafani, Founder and CEO
Barron’s Wealth & Asset Management group is a division of Barron’s Group that develops content,
events and tools for advisors to improve outcomes for clients and grow their practices. If you have
questions or comments on this report, please email advisor.editors@barrons.com.
Executive Editor: Matthew Barthel
Editor: Eileen Cho
Data Consultant: Seth Redlus
Art Director: Sandy Ng
Illustrator: Sébastien Thibault
11© 2021 Barron’s Group & Dow Jones & Company, Inc. All rights reserved. BA_InRep_101521
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