Registered Rep: Fidelity's IWS has made some new offerings available to RIAs looking to grow through M&A. What does the timing of such an offering indicate?
David Canter: The economy is slowly coming out of a downturn. For advisors and their businesses, it means there is an increased focus on growth through acquisition. During the downturn you have advisors spending much more time attending to clients than they are on the growth of their practice. Now though, we are seeing interest on a weekly basis from firms approaching us to talk about acquisitions
RR: What kinds of firms are seeking out acquisitions?
DC: Firms that are pursuing growth through acquisition are coming in all varieties. Interest is coming from large firms looking to acquire another large firm; firms that are more interested in bringing on breakaway wirehouse brokers rather than entire firms; and small firms that are looking to be integrated into larger firms.
RR: Are any non-RIAs buying up RIAs?
DC: The majority of the activity is within the existing RIA base, but there are also some roll-ups and RIA aggregators looking to make deals.
RR: What should firms know before entering any kind of M&A deal?
DC: Advisors need to know their own readiness before anything else — look inward first. Make sure you have spent time on your business strategy. Does your firm have the infrastructure and scale to add new advisors, is there an investment philosophy in place, do you have an internal champion who can manage the deal? You need to know what you want. Maybe it's a geographic acquisition or maybe it's about succession planning. Those are all issues the advisor needs to have answered before it can look to the outside and find the right firm to acquire or merge with.
