Fidelity: PE Fueled Record 89% of RIA Deals in 2024Fidelity: PE Fueled Record 89% of RIA Deals in 2024

The registered investment advisor deal space has been booming over the past decade, and forward-looking indicators point to more growth ahead in part fueled by private equity investors, according to Fidelity Investments’ 10th annual RIA M&A activity report.

Fidelity’s tracking of deal announcements shows 233 RIA acquisitions last year, compared with 89 in 2015, a 10-year compound annual growth rate of 14%. Meanwhile, purchased assets from those deals increased from $130 billion to $670 billion.

While the numbers have risen, the reasons behind the deals have largely remained the same, said Laura Delaney, vice president of practice management and consulting for Fidelity.

Those drivers are RIAs looking to expand client services, better handle the burdens of HR, legal and compliance by accessing a central support platform, and planning for succession.

“Until those fundamental drivers go away, we’re going to see M&A for years to come,” Delaney said.

The pace of deals has been fueled by private equity funding, even as interest rates have climbed higher, Delaney said.

According to Fidelity, private equity backed 89% of RIA deals in 2024, a record. In comparison, private equity firms financed 43% of RIA acquisitions in 2016.

Private equity general partners are also extending their investment holding periods in these firms beyond the usual five to seven years, becoming more active owners and reaping the healthy cash flows RIA's can generate.

“PE is becoming much more involved in [RIA] firm strategy,” Delaney said. “They came in at first with a message of, ‘Here’s our capital, and we’d love for you to use it as you see fit.’ We’re seeing that dial up to more active strategy setting at the beginning of the year. ... They’re playing the longer game and betting on those reliable returns.”

While more aggregators have also entered the acquisition space, much dealmaking has been driven by a relatively small group of strategic acquirers. Since tracking began in 2015, 105 firms have made at least two acquisitions, and 43 have completed at least five.

Last year’s top dealmakers included Focus Financial and its consolidating affiliates (21), Wealth Enhancement Group (12), Waverly Advisors (10), MAI Capital Management (10), Mercer (9), and Allworth Financial (9).

In addition to the record-setting RIA deals in 2024, the broker/dealer channel also yielded six transactions of $240 billion in assets.

As Fidelity admits, those numbers are not the full picture. The reporting doesn’t include recruiting events where teams are acquired with remuneration pay or M&A without an accompanying public notification.

Delaney said all signs point to the market continuing to be frothy in the coming years, with a potential “third wave” of private equity investment on the horizon. In addition, deals are starting to proliferate outside of RIA consolidation to other areas of financial services as firms look to become one-stop fiduciaries.

Fidelity counted 21 adjacent practice acquisitions by wealth management firms in 2024 in areas such as tax practices, investment firms and business consulting practices.

Delaney calls these adjacent acquisitions “chapter two” of the RIA deal evolution after the initial wave of wealth managers acquiring peers.

She said chapter three will involve a mega-merger in the space, a trend many are predicting and one that could significantly shape the future decade in the industry.

“We don’t yet know how it will happen, but it’s something we’ll be keeping our eyes on,” she said.