Client Service September 20, 2023

DeVoe: Advisory Dealmaking Outpacing Last Year’s Q3

The uptick comes as RIA M&A activity experienced a slowdown for the previous 12 months.

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Mergers and acquisitions activity among registered investment advisories in the year’s third quarter has already outpaced the same period in 2022, according DeVoe & Co.

As of September 13, transactions posted in the quarter reached 55, 4% more than the same period last year (53), the consultancy reported in a release and at their M&A+ Succession Summit in Dallas.

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While 35% of advisers surveyed by the firm said higher interest rates influenced their dealmaking decisions, a greater percentage still expect to acquire a firm within the next two years, at 65% of those surveyed by DeVoe. That expectation of dealmaking compares to just 55% from last year.

DeVoe revealed that July and August were strong months, with 23 and 27 transactions, respectively. Deals did slow in early September, with only five transactions through September 13. Overall, the uptick in M&A activity in the quarter reverses the 15% decline the industry had experienced from Q3 2022 through Q2 2023.

“Given the steady slowdown in M&A activity over the last several quarters, this is a notable uptick,” David DeVoe, founder and CEO of DeVoe & Co., said in a statement. “RIA M&A activity may continue to be volatile in the short-term; yet the mid-term and long-term should be an upward trajectory. The aging of RIA founders and an increasing interest in scale are expected to drive increasing M&A activity for the next several years.”

The dealmaking has not yet put transactions on pace to exceed last year’s total, and DeVoe still predicts fewer total deals this year than last. Transactions posted year-to-date amounted to 175, compared to 188 transactions for the same period the previous year. 2023 could potentially be the first down year in a decade of annual M&A transaction increases, according to slides provided by DeVoe.

The last 12 months of slowdown coincided with high interest rates, uncertainty in the economic environment and a volatile stock market, DeVoe reported. Q4 2022 was the beginning of the decline, when transactions were 20% lower than same period the year before. The subsequent quarters saw continued drops, with a 7% decline in Q1 2023 and a 15% decline in Q2 2023.

Whatever the environment, private equity firms and other investors still appear bullish on potential consolidation in both wealth management and retirement. On Tuesday, Carlyle Group Inc. announced a minority growth investment in RIA CAPTRUST Financial Advisors to, in part, fuel the firm’s continued growth.

In August, Goldman Sachs Group Inc.’s asset management arm, along with Charlesbank Capital Partners, announced a $1 billion capital infusion in World Insurance Associates LLC, in part to help fuel World’s Pensiomark Financial Group with its wealth management acquisition strategy.

DeVoe’s research found that adviser sentiment may be shifting more toward acquisition by aggregators, as opposed to from within the RIAs. Only 18% of advisers are confident that the next generation can afford to buy out the founders, DeVoe said. Previous years’ confidence levels were far higher, 38% in 2021 and 29% in 2022, according to a slide presentation shared by the firm.
Client Service September 20, 2023

Conduent to Transfer $2.7B in HSA Assets to HealthEquity

The business processes outsourcing provider will exit the flexible spending account business, and plan sponsors' accounts will transfer to HealthEquity in the first quarter of next year.

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Conduent Inc. announced that the business processes outsourcing provider will exit the flexible spending account business, a company executive confirmed.

Conduent will transfer all of its health savings account assets, currently managed on its consumer account platform, BenefitWallet, to HealthEquity Inc., a fintech company that serves as a non-bank health savings trustee.

The firms have entered into a definitive agreement to transfer $2.7 billion in HSA assets held by approximately 665,000 customers in Conduent’s BenefitWallet platform to HealthEquity, a release noted. The agreement, subject to regulatory approval, projected a purchase price of approximately $425 million for the transition of all BenefitWallet HSA accounts to HealthEquity, the release added.

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“We will be converting our HSA accounts—the BenefitWallet HSA accounts—to Health Equity at some point during the first quarter of next year, and then ultimately exiting our FSA administration business,” says John Larson, Conduent’s vice president of HR services. “This is part of our overall portfolio rationalization strategy at Conduent: driving focus within the businesses that we excel in, while rationalizing the portfolio further and exiting businesses where it makes sense.”

Plan sponsor client notifications began this week, Larson adds. For plan participants with HSAs, Conduent will continue operating BenefitWallet and maintain accounts through the early 2024 conversion date, he explains.

“As we get closer to that [conversion] date, we’ll be communicating transition plans more broadly with our account holders,” says Larson. “Until that time, it remains business as usual for BenefitWallet.” 

Currently, HealthEquity serves as the custodian of more than  with assets totaling $23.2 billion, the release stated.

“Once the deal is approved, the HealthEquity and Conduent teams will begin detailed planning for the account transfers, including client and member communications, investments and the transfer timeline,” says Richard Putnam, vice president of investor relations at Health Equity, by email.

Going forward, Conduent will partner in HSA work instead of acting as direct administrator, Larson adds. Conduent will effectively shutter BenefitWallet and then will enter into a relationship with HealthEquity “to be our preferred partner for both HSA and FSA administration moving forward,” Larson says.

Assets held in HSAs surpassed $100 billion in total assets for the first time in 2022, and accounts experienced robust asset growth early in 2023, research from HSA consultant Devenir Group LLC showed, earlier this year.

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