Specialist
Executive at New Jersey-based financial advisor and recruitment company
Agenda
- Operating environment for RIAs (registered investment advisors), highlighting macroeconomic backdrop’s impact on deal activity and fee compression
- Potential volume of deal activity we could see and whether current multiples being paid for M&A are sustainable over time
- Relative M&A strategies and activity of Focus Financial (NASDAQ: FOCS), Hightower and others
- Outlook for 2023 and beyond, highlighting the potential for larger platform transactions
Questions
1.
What are your thoughts on the current operating environment for RIAs [registered investment advisors]? Which 2-3 key trends or drivers should we pay attention to?
2.
What is your 1-3-5-year outlook for the RIA TAM? Are you expecting any trend continuation or do you see a catalyst occurring to change the current trend?
3.
What can wirehouses do to stave off the migration of financial advisors to independents?
4.
Focusing on the RIA industry overall, what churn are we seeing for advisors? How are firms acquiring or retaining advisors?
5.
How has the current market downturn combined with rising rates and high inflation impacted the RIA industry as a whole?
6.
What performance should we expect from RIAs if we enter a recession?
7.
There has been substantial conversation around an expected wealth transfer from the ageing boomer generation to the millennials and gen Zs. How could this impact the RIA industry and what should investors look for?
8.
Is there a risk of younger generations choosing not to work with advisors? Although robo-advisors had a lot of hype, it seems they haven’t really gained too much traction.
9.
Can you comment on the current magnitude and core drivers of fee compression?
10.
RIAs have been adding more products such as tax planning and estate planning to avoid fee compression. Will they run out of new things to add and eventually have to compress their fees a little, or do you see other options that can continue to be tacked on to other services?
11.
To what extent are RIAs utilising technology and how much will this improve their margins? How receptive are clients to new technology that might be implemented?
12.
What magnitude of fee compression could we see as technology gets increasingly implemented? If we’re at X% today, where could we be in the short and long term?
13.
What could be a driver of fee compression?
14.
Do you have any views on the current regulatory environment? Do you expect any material changes in the coming years that could impact the RIA community?
15.
What are your thoughts on key players such as Focus Financial, Hightower and Mercer, the relative positioning of each and how they differentiate from each other?
16.
Could you provide some colour on the puts and takes of the different M&A strategies?
17.
What is the RIA community’s assessment of the various RIA aggregator models out there?
18.
What do you make of insurance firms moving into the wealth management industry with NFP and Wealthspire?
19.
Do you think Edelman can be successful in bridging both retirement and tax accounts?
20.
What are your thoughts on the M&A market so far in 2022?
21.
What has been the impact from the consolidation we’ve seen to date? What are your expectations for consolidation and its market impact?
22.
Are any specific types of RIA more focused on M&A, such as high net worth or ultra-high net worth?
23.
You mentioned that some of the aggregators pay based on the trailing 12-month cash flow. If a market correction sustains then AUM [assets under management] will decrease just because values have gone down, which could cause trailing 12-month cash flows to decrease as well. Might some people look to sell now rather than wait one year because they might fetch a lower value?
24.
How have multiples trended through H1 2022 and how does it compare to 2021?
25.
What’s your H2 2022 and 2023 outlook for multiples? Do you think we can keep this 6x-15x range? Will it go a little higher or maybe compress a little?
26.
How are PE investors currently viewing the RIA industry? Do you think the high multiples are making them reconsider, maybe they won’t get as large of a return, or are they still pretty active in the space?
27.
Do you have any thoughts on the Schwab acquisition of TD Ameritrade in October 2020? What might be the opinion of RIAs who historically used TD Ameritrade?
28.
How should we assess typical, post-acquisition organic growth after a firm gets acquired? What synergies or cost savings can be created through an acquisition?
29.
What are your thoughts on the competitive landscape across public, private and PE-backed entities? How should we assess the relative M&A strategies used by the main players in each?
30.
What characteristics would make a target company appealing? Is there any key criteria that an acquiring company needs?
31.
How often are targets becoming available and how much competition is there for targets?
32.
Do you see any potential for disruptors or drivers of disruption in the RIA industry?
33.
What should we consider when assessing potential winners or losers of the names we’ve discussed?
34.
What is your broad outlook for H2 2022 and Q1 2023? Do you have any potential wild cards we might see on the horizon?
35.
Is anything commonly misunderstood by the investment community about the RIA industry? What contrarian views could be interesting?
