Is the Pace of RIA Consolidation Slowing in 2022?

The RIA space has been filled with mostly independent advisors for a long time. In recent years, however, RIA consolidation began. Now, it seems to be slowing down in 2022. Take a closer look at the trends regarding RIA consolidation, including whether it truly is slowing down. 



RIA Consolidation Has Been a Trend Since at Least 2020


The trend of RIA consolidation has been around since at least 2020. At the time, experts pointed to several causes of the consolidation, including: 


  • Declining fees
  • Aging advisors
  • Technology competition
  • Race for scalability
  • Increasingly complex regulations
  • Expanding investor expectations 


As of 2020, there were more independent advisors than those who were employee-based. Specifically, the former now accounted for 52% of advisors. But this also marked a shift back in the other direction, toward consolidation. 


That trend has been continuing strong, including into the 2022 Q1. 


Looking Back at Pandemic Influences


The trend of consolidation has continued even through the pandemic, although on a smaller scale. Before the pandemic, 2019 saw 131 deals. In 2020, there were 159. Then, 2021’s 242 deals indicated a boost in confidence. 


Experts also believe some of the increase in 2021 was from companies trying to minimize tax increases with the new administration. Others were likely still influenced by COVID. By 2022, however, those driving factors had disappeared. 



Q1 of 2022 Was Big for RIA Consolidation


The first quarter of 2022 highlighted the trend of RIA consolidation. It was actually the second-largest quarter ever. During this quarter, there were 67 consolidation deals announced. For reference, Q1 of 2021 had 58 deals. The next significant quarter was Q4 of 2021, with 76 deals. 


But the Quarter Included a Slowing Pace


Despite the record number of RIA consolidation deals in Q4 of 2021 and Q1 of 2022, there is a clear trend of slowing. To start, as we noted, Q4 2021 had more deals than Q1 2022. 


It becomes even clearer when you look at the figures for each month. January saw 27 deals, with 23 in February and 17 occurring in March. 


Another aspect of the data of interest is the size of the firms acquired. Q1 2022 marked the first time since 2019 that their average size was under $1 billion. For reference, two years ago, the average size of acquired firms in Q1 was $1.02 billion. Last year, it was $1.1 billion. This year, it was just $747 million. 



The Takeaway


RIA consolidation has been common in the last several years. It comes from numerous factors, from increasing regulation to the fact that the industry was so disjointed. While Q1 of this year saw a record number of RIA consolidation deals, it also indicated a slowing pace. This may be an indication of what is to come.