Interest Still Strong in Retirement Plan Adviser Acquisitions

Retirement plan advisory acquisitions have remained relatively strong through 2024, according to a Q3 M&A trends report by consultancy MarshBerry.

The firm noted that transactions involving retirement plan advisories are not as prevalent as the rampant dealmaking amid individual wealth-focused registered investment advisers. But it has remained robust compared to prior years, according to the firm, “especially for specific buyers like insurance brokerage firms.”

Those buyers are interested in part due to the synergies between services for benefits and those for employer-sponsored plans, but also because brokerages have increased their focus on wealth management, says John Orsini, a director in Marshberry’s wealth advisory division.

“Historically, insurance brokerage acquirers targeted retirement planning firms to strengthen their employee benefit offerings and explore other crossover business opportunities,” he says. “These insurance brokers naturally extended their reach to retirement planning firms that also included wealth advisory services. As these brokers built and strengthened their platforms, they began to seek stand-alone wealth advisory opportunities in a more meaningful way.”

For retirement plan advisers, it is increasingly difficult to run a strong independent business due to fee compression, the firm noted in the report. Lower fees are driving firms to increase scale, both to operate more efficiently and to compete against other aggregators.

“Smaller firms are in a constant struggle to compete in the market with larger platforms, which benefit from access to captive clients, better pricing power, comprehensive back-office support, and the ability to adapt to changing regulations such as [the SECURE 2.0 Act of 2022],” the consultancy wrote.

 According to Orsini, remaining small advisories should have plenty of interested buyers. In addition to the broad-based registered investment advisers focused on retirement plans, Marshberry has also observed a subset of wealth-focused firms, which tend to focus on high-net-worth individuals.

Those firms are “interested in delivering a stronger offering to their wealth clients, many of whom are business owners, by incorporating a retirement plan offering,” Orsini says. “The demand for retirement plan businesses has increased, as limited supply is being met by a growing number of buyers seeking inorganic growth opportunities.”

Just this week, two deals that included at least some retirement plan advisement business were completed by the Alera Group and by U.S. Retirement & Benefits Partners.

By Marshberry’s count, there have been 20 deals involving retirement advisories year-to-date, a 33% jump since the middle of the year. That volume is on pace to approach or match 2023, when the firm reported a total of 26 deals. Activity is down slightly from a peak of 28 deals in 2022.

Marshberry also noted in its report an increasing trend of insurance brokerages, more traditionally focused on employer-sponsored plans, moving into wealth management, financial planning and family office services. Of the 25 transactions completed by insurance brokers through Q3, 19 of them, or 79%, involved firms that provide wealth advisory services—up from about 72% in 2023 and 66% in 2021.

“As insurance brokerage firms diversify themselves from their competition, their goal of becoming comprehensive, one-stop solution providers is crucial,” the consultants wrote. “MarshBerry anticipates that, despite the time required for shifts in investment strategies to yield results, this segment of buyers will likely grow in the future.”

There were 234 total wealth transactions through the end of Q3, according to Marshberry, 12.5% higher than at the same time in 2023. The consultancy anticipates a “strong finish” to the year, potentially topping the 308 transactions made in 2022, the highest number since Marshberry started tracking in 2020.

“Seller activity is primarily influenced by two factors: the aging demographic of registered investment advisers’ (RIAs) firm owners and the rising trend of firms pursuing strategic partnerships for growth,” the firm wrote. “Many older advisers in their late 50s and early 60s lack viable succession plans, which shortens the window for their firms to be viewed as growth investments, diminishing their value over time. Conversely, many business owners recognize the need to invest in their operations for sustained or accelerated growth, expanded service offerings, or new technologies, prompting them to collaborate with established platforms.”

Some of the year’s biggest dealmakers so far include Wealth Enhancement Group with 11 transactions, Cetera Financial Group with 9 transactions, OneDigital with 6 transactions and Kestra Financial with 6 transactions.