Wealth Management Sector and M&A Robust in 2024

Wealth management continues to be a hot ticket in finance, according to two recent reports.

On Monday, Echelon Partners gave its first impression of wealth management-related mergers and acquisitions, counting 90 transactions in Q1, a 20% increase in deal count compared to the same period last year, and the second most active first quarter on record since it began tracking in 2017.

“Strategic acquirers continue to play a dominant role in the wealth management M&A landscape, accounting for an impressive 85.6% of transactions in 1Q24,” Echelon Managing Partner and CEO Daniel Seivert and team wrote in the report. “These players (and their financial backers) are deploying substantial capital towards M&A, underscoring the industry’s ongoing focus on consolidation and realizing synergies.”

Echelon, a boutique investment bank based in Los Angeles, noted that, as deals usually take nine months to complete, the activity likely reflects deals from 2023 extending into 2024. The deals represented $570 billion in total assets transacted.

Registered investment advisors continued to dominate the buyer population in Echelon’s list, but the deal pool also included private equity firms, broker dealers, asset managers and insurance companies. Many of the retirement plan advisement and wealth management aggregators in the space in recent years have been a similar combination of private equity-backed RIAs and insurance brokers.

Most of the deals (77) were made by strategic acquirers looking to grow their firms in scale and capability, according to Echelon. Just 13 deals were made by financial acquirers looking for returns rather than business “synergies.”

In Q1, some of the biggest retirement plan related deals came via private equity. That included Lee Equity Partners LLC taking a majority stake in PCS Retirement LLC, a retirement plan recordkeeper, and Lightyear Capital LLC making a strategic investment in Prime Pensions LLC, a retirement plan compliance and administrative services firm. Meanwhile, Mariner Wealth Advisors added retirement plan advisement capabilities with the acquisition of AndCo Consulting, with a reported $104 billion in assets under advisement.

The largest wealth deal in the quarter was made by LPL Financial when it acquired Atria Wealth Solutions’ $100 billion in assets.

Based on this initial flow, the consultancy also forecasts 330 total deals by the end of 2024, up from 321 deals announced in 2023, and at an average asset size of $1.8 billion; that prediction includes a robust Q2.

“Historically, the second quarter tends to exhibit lower deal volume,” the firm wrote. “However, buoyed by the substantial number of deals already in motion, ECHELON foresees a 2Q24 that may rival the performance witnessed in 1Q24.”

Global Market

In a separate report released Thursday, market research firm Technavio noted robust growth in the wealth management sector globally as driven in large part by demand from North America.

Globally, the firm puts the current wealth management market at $635.2 billion, then forecasts a compound annual growth rate of 7.02% from 2022 to 2027, or an increase of $325.6 billion by 2027.

In the report, the researchers cited drivers of that growth to come from a rising number of high-net-worth individuals globally, the introduction of increasingly diverse wealth management services by vendors, and a rising demand for alternative investments along with support from regulators.

The firm did, however, note some headwinds to that growth, which included: pressure on pricing structure of wealth management firms, the growth of financial technology companies as competitors and risks of transactions not working out as intended.

Finally, the firm listed trends to watch in the space including technological advancements in the market, a growing focus on sustainable investing, and a change in demographics creating wealth management opportunities.  

The report considered the wealth management market globally by region, including North America, South America, Europe, Asia Pacific and Middle East and Africa; North America held the largest share of the global market in 2022, according to Technavio, which is based in London.

“The wealth management industry in North America, led by the US and Canada, continues to dominate the global market due to developed economies and high-income levels,” the researchers wrote. “The Asia Pacific market, fueled by rapid urbanization, is a significant growth area, with cyber security technology, transparent pricing tactics, and portfolio management capabilities essential [for success.]”

While technology is playing an increasing role in financial services, including increased use of artificial intelligence, “human advisory continues to add value through financial counselling and wealth management expertise,” the firm wrote. “The future of the wealth management Industry lies in the balance between human and digital solutions.