Inside Talk With the Number One RIA Acquirer

Investing in talent can be a make-or-break moment for an RIA’s acquisition, says Wealth Enhancement Group’s Meredith Schwarz.

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Illustration by RIA Intel

RIA mergers and acquisitions have remained steady throughout 2023, but they did slightly trail the historic highs recorded in 2022.

Deals got smaller and the number of transactions involving RIA over $1 billion in assets declined.

Despite recent declines, the RIA marketplace is still extremely active compared to levels before the COVID-19 pandemic. In 2020 quarterly deal volume hit a high of just 48 deals. By comparison, there were 68 transactions in the third quarter of 2023, according to Devoe & Company, a consultant and investment bank specializing in M&A and wealth management.

However, even as some firms pulled back, Wealth Enhancement Group, an RIA with $71 billion in assets, was one of the most active acquirers in wealth management last year. In 2023, Wealth Enhancement Group completed 18 acquisitions. By comparison, the firm closed 13 deals in 2022 and 19 deals in 2021.

Meredith Schwarz, vice president of mergers and acquisitions at Wealth Enhancement Group, sat down with RIA Intel to discuss why the firm has continued to expand through acquisitions and how it differentiates itself to the RIAs it wants to acquire.

Answers have been edited for clarity and length.

RIA M&A transactions across the industry slowed slightly this past year, but Wealth Enhancement Group actually increased the number of deals it transacted. Why is that?

Part of the reason we’ve been incredibly active this year is we’ve been buying smaller firms. They’re a great fit for us because we provide them size and scale to grow. We found that sellers are really looking for partners that have scale in order to better their offerings, their marketing, their compliance, and technology. There are a lot of matches that are being made between larger firms like us, which have that scale, and smaller firms that are finding it challenging to compete. So that’s one of the drivers behind why our number in 2023 was high.

What do you look for in a company?

First and foremost, we look for a really strong cultural fit. We want a firm that is client-centric, growth-oriented, planning-focused, and has demonstrated growth. Beyond that, our size parameter is really broad. Some people think that because we’re really large, we’re not interested in buying smaller firms, but that’s not true. We’ve acquired firms that have anywhere from $150 million up to $5 billion in AUM.

It’s also incredibly important to us that they’ve invested in the second generation of advisors. We really try to drill into where the firm has invested in talent and how ready is that second generation to take over. Do they service their own clients? Are they operating independently with their clients? At the end of the day, M&A is all about acquiring talent so that we can have long-term sustainable growth. If we bought just a whole bunch of businesses that had retiring advisors, what’s going to happen in two years when all those advisors retire?

What are some of the M&A trends you are seeing?

I would say the universe of buyers has dramatically expanded over the last two years. Two years ago, you saw buyers that looked really similar. Now when we are competing for a deal, the types of buyers are really diverse. You have private equity, but they might be really small private equity funds or really big. You might see really small RIAs that are only going to do one acquisition or you might have larger RIAs like WEG. Insurance companies are also a big acquirer of RIAs. Private equity money has helped fuel a lot of growth, including our own, and that is driving a lot of the consolidation.

You mentioned earlier that this M&A consolidation can’t continue forever. When do you think it will end?

I really don’t know. We have that conversation all the time. What I can tell you is we look at it one year at a time. But for now, I definitely see a strong market continuing. You always worry a little bit when the holidays start to get close that Q1 is going to be really quiet the next year but we’re previewing a lot of deals that will be coming to market in 2024. We look really closely at the year ahead and there’s absolutely no sign of our industry’s M&A market slowing down.

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