Wealth advisers sell amid slump to survive: study
Once driven by their desire for an up-front profit, wealth advisers have been selling their firms out of fear they may not survive the economic downturn, an industry study released Wednesday said.
The study - commissioned by Bank of New York Mellon Corp's
The recent deals - 35 through the first three quarters of 2009 - are about self-preservation.
Many small RIA firms are looking for a lifeline through an association with a larger firm, the study said.
Boutique investment firms, typically created when wealth advisers leave the largest U.S. brokerages, are at the center of a long-predicted shift of business and billions of dollars in client assets away to more local and regional players.
Deals were driven by long-term growth prospects and sustainability of the firm, rather than short-term profit, the study found. Cost savings and economies of scale were often the main drivers, rather than a jolt to earnings.
The study found that, on average, the deals done so far this year were fewer in number, but larger in relative size.
The typical advisory firm sold this year had $600 million in assets under management, $4 million in annual revenue and $700,000 in net earnings, the study found.
And while deals were down from their peak in 2007, wealth advisory mergers and acquisitions this year were still ahead of the pace seen early in the decade.
Investment advisers were involved in 45 deals in 2008, a pace 2009 will likely match, the study said.
From 2000-2004, no more than 36 deals were done by wealth firms in a single year, a figure 2009 is expected to exceed.
The critical drivers for transactions have not gone away, the Pershing study said.
(Reporting by Joe Rauch, editing by Leslie Gevirtz)
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