There has been a fair amount of talk over the past decades about consolidation in the financial services industry. Most of the white papers and articles addressing this concept have presented it in a negative light as though it signals the end of the lifestyle practices that dot the landscape in this profession. Industry regulation, growth, technology, fee compression, competition, and aging advisors forced smaller practices to consolidate just to survive. At least that was the working theory.
As the original organizers of the open marketplace for independent advisors seeking to sell or to acquire, we have a slightly different perspective on consolidation; we view it in a very positive light. Consolidation looks very different than what the prognosticators laid out decades ago. From our vantage point of working with businesses below $2 billion in AUM, we’ve observed the industry is indeed experiencing some consolidation, but not only due to acquisitions or roll-ups by companies like Focus Financial, United Capital, or Dynasty. The consolidation that we see every day is owners of stronger, sustainable enterprises acquiring smaller, one-generational books and practices.
Viewed in this light, how better to look after 250 clients or households when a single-owner advisory practice nears retirement than to find a very similarly structured business that can step in, take over, and provide for the staff members as well? This process works for the buyers, the sellers, and, most importantly, the clients.