Deals & People April 8, 2021

Q1 2021 Sees ‘Record-Shattering’ Pace of Adviser M&As

Strong market conditions, increased competition from buyers and favorable deals for sellers laid the foundation for the activity, according to the latest data published by Echelon Partners.

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Echelon Partners has published its latest quarterly review of adviser and brokerage industry merger and acquisition (M&A) activity, finding the first quarter of 2021 shattered the previous record.

According to Echelon, there were 76 deals that took place in Q1 2021. This is the largest number of deals in a single quarter in the history of the wealth management industry, the report states.

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“Strong market conditions, increased competition from buyers and favorable deals for sellers laid the foundation for the record-setting activity,” Echelon reports. “However, anticipation that the new [presidential] administration could introduce higher capital gains taxes that could go into effect in 2022 also accelerated dealmaking activity.”

Echelon says the 76 deals marked a 10% increase over the previous record (set in the fourth quarter of 2020) of 69 deals, and a 117% increase over the second quarter 2020 low of 35—tallied at the onset of the COVID-19 pandemic. All signs suggest 2021 is already on pace to be the ninth consecutive year of record-setting activity, Echelon says.

Not only has the number of deals continued to accelerate, the industry also continues to break records for the average deal size. Echelon’s data shows the average seller in the first quarter of 2021 managed more than $2.3 billion—making this the first quarter for this average figure to surpass $2 billion. According to the report, this new high-water mark also tops 2020’s record by 29%.

Just such a deal was revealed this week, in Hub International’s acquisition of Plan Sponsor Consultants. The financial terms of the transaction were not disclosed, but Plan Sponsor Consultants currently manages about $2.4 billion in assets.

Headquartered in Atlanta, with an additional location in Birmingham, Alabama, Plan Sponsor Consultants has been repeatedly recognized as a PLANSPONSOR Large Team Retirement Plan Adviser of the Year. As with Hub’s numerous previous acquisitions, this deal underscores the blurring of the lines between the traditional silos in the wealth management industry.

“Plan Sponsor Consultants’ joining Hub continues our expansion in the Gulf South region and our focus on expanding our retirement capabilities to round out the services we offer to clients,” says Shaun Norris, president of Hub’s Gulf South region. He notes that Managing Director of Plan Sponsor Consultants Michael Kane and Senior Vice President Lee Applebaum will join Hub Retirement and Private Wealth (Hub RPW) in the region. 

Norris says this move continues to strengthen Hub’s retirement and wealth management services with the addition of talent and resources to develop more comprehensive strategies. After several years of concerted M&A activity, Hub now has in its deck several registered investment advisory affiliates whose total assets are approximately $93 billion.

Echelon’s data also underscores the importance of building scale in this market environment, as evidenced by the fact that the first quarter registered lower (but still relatively robust) “breakaway” volume. A breakaway occurs when a financial professional (or group of professionals) working for a national wirehouse or an established regional broker/dealer (B/D) “breaks away” from their platform provider to instead either join a more suitable existing firm or to form their own registered investment adviser (RIA).

According to Echelon, there were 124 breakaways recorded in the quarter, a 17% decrease over the final quarter of 2020. The report projects there will be a decline in the number of breakaway transactions this year if the current pace continues.

Data & Research April 7, 2021

Many Near-Retirees Don’t Understand Social Security Benefits

More than one-third failed a basic Social Security quiz administered by MassMutual.

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Thirty-five percent of near-retirees, those between the ages of 55 and 65, failed a basic knowledge quiz about Social Security benefits that MassMutual administered. Another 18% earned a D on the graded quiz, and mere 3% got an A+ by answering all 12 true/false statements correctly.

MassMutual also found that 26% of respondents between the ages of 60 and 65 do not know when their full retirement age is.

On the bright side, however, 83% understand the consequences of taking Social Security benefits before full retirement age, and 94% realize that if they do this, their benefits will be reduced. Another 86% know that if they begin taking their benefits before full retirement age and continue to work, their benefits may be reduced based on how much they make.

“Today, Social Security is the primary guaranteed retirement income stream for Americans, besides pensions and annuities,” says Paul Lapiana, head of MassMutual U.S. product. “For those looking to maximize their retirement income stream, one option is to depend on an annuity to fill the gap and hold off on taking Social Security benefits to grow delayed retirement credits and receive the largest possible benefit for life.”

During the COVID-19 pandemic, people expressed interest in a variety of Social Security topics, including survivor benefits. But even with the increase in interest, 22% thought that if a spouse passes away, a recipient can receive both their and their spouse’s full benefits, which is not true.

Many near-retirees were also wondering about the impact of a divorce on Social Security retirement benefits. Thirty percent didn’t know that a divorced person may be able to collect Social Security benefits based on an ex-spouse’s earnings history.

Another impact of the pandemic is that layoffs, furloughs or pay cuts could negatively Social Security benefits, as they are based on the top 35 years of earnings.

“As with most things in life, knowledge is power, and choices should be made on purpose and not by accident,” says David Freitag, a financial planning consultant with MassMutual. “With Social Security, there are a lot of options to consider. Make the wrong choice, and you will be leaving money on the table—for the rest of your life.”

MassMutual commissioned the survey, which PSB Research conducted between March 1 and March 9 among 1,500 Americans between the ages of 55 and 65 who have not yet filed for Social Security benefits.

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