BOSTON — Fidelity Clearing & Custody Solutions, the division of Fidelity Investments that provides clearing and custody to registered investment advisors (RIAs), retirement recordkeepers, broker-dealer firms, banks and insurance companies, today released the Fidelity 1H 2016 Wealth Management M&A Transaction Report, which highlights the RIA mergers and acquisitions through the first half of 2016. The report focuses on Strategic Acquirers, firms that take a financial interest in an advisory firm to help them grow and perform more effectively through strategic guidance and operating support. Those firms have driven 39 percent of all M&A activity in 2016, and, based on extensive interviews with executives at major strategic acquirers, the report outlines different models of Strategic Acquirers as well as their approaches to acquisition. The findings also highlight how a need for scale, in order to help improve firm profitability, has driven this continued industry consolidation.
"Our goal with this report is to help advisors who are considering strategies to take their businesses to the next level to better understand their options and learn more about how to navigate the M&A space," said David Canter, executive vice president, practice management and consulting, Fidelity Clearing & Custody Solutions. "One thing they should know as they prepare for the negotiation process is that they will have to redefine their role as an entrepreneur. While that may mean giving up some control in order to continue to grow their business, a strategic acquirer may also help to drive scale and growth through capital and expertise."
The 1H 2016 report builds on the findings from Fidelity's M&A Transaction Report issued in April 2016, which included specific details on the transactions in order to offer more insight on what's really going on in the marketplace.
For the majority of Strategic Acquirers, their approach has generally evolved from acquiring the cash flows of books of business to a more deliberate focus on building sustainable and better integrated businesses through acquisitions. The report, leveraging insights from firm leaders, introduces five Strategic Acquirer models1:
In addition to providing a detailed list of transactions for 1H 2016 and highlighting Strategic Acquirer models, this new report outlines questions that RIAs should ask themselves before beginning to engage with strategic acquirers:
- What does being an entrepreneur mean to you as an advisor, and how would you like that to change to achieve your business objectives?
- Why do you need capital, what for, and how would you balance that need with the desire for independence/autonomy? What outcome do you seek?
- What do you need from a strategic acquirer: Capital? Access to talent? Management skills? An investment platform? Operating scale and leverage?
- What kind of a partner do you want?
"The biggest takeaway here for RIAs is that M&A strategies are becoming an increasingly important consideration for the future of their businesses," continued Canter. "In order to realize their full potential value, advisors need to think about the firm they want to partner with and whether their businesses are in a good position for a successful acquisition."
For more information, check out Fidelity's 1H 2016 Wealth Management M&A Transaction Report.
About Fidelity Investments
Fidelity's goal is to make financial expertise broadly accessible and effective in helping people live the lives they want. With assets under administration of $5.4 trillion, including managed assets of $2.1 trillion as of June 30, 2016, we focus on meeting the unique needs of a diverse set of customers: helping more than 25 million people invest their own life savings, nearly 20,000 businesses manage employee benefit programs, as well as providing nearly 10,000 advisory firms with investment and technology solutions to invest their own clients’ money. Privately held for nearly 70 years, Fidelity employs 45,000 associates who are focused on the long-term success of our customers. For more information about Fidelity Investments, visit https://www.fidelity.com/about.