SAN FRANCISCO | Fri 29 april 2011 3: 26 pm EDT
SAN FRANCISCO (Reuters)-advisors eager to make money or build their practices by sales or mergers a slight setback in the first quarter as less listings were consumed, according to a new report.
The number of registered investment advisors who sold or merged their companies dropped to 23 from a record 25 in the quarter last year, while the average size of acquired companies slid 39 percent to 904 million dollars of client assets under management of $ 1.5 billion for all deals done in 2010.
The data were collected by Charles Schwab Corp., the largest provider of investment products, trade and detention services into the community of registered investment advisor.
The first quarter deal count is off the pace for all 2010 when Schwab tallied 109 takeovers of Rias with managed assets total of 156 billion dollars. That was the highest total deal since Schwab follow RIA acquisitions in 2003.
David DeVoe, managing director of strategic business development at Schwab Advisor Services, warned that data from a single quarter insufficient for drawing conclusions about the annual trends.
IN-CHANNEL LISTINGS
RIAs that are approaching retirement or looking to build their practices through affiliations with larger companies increasingly combine with other RIAs than with banks, broker-dealers or between persons with an interest in the companies buy.
The trend interchannel acquisition, which is about two years ago, started well for 55% of first quarter deals, underline for RIAs ' "growing sophistication in M & A. ..o in order to achieve their business, "said DeVoe.
Schwab closely parallel the findings released April 27, a report by Bank of New York Mellon's Pershing Advisor Solutions LLC, another great broker for customers of RIAs.
Banks, which prominent buyers of small advisors early last decade, "have faded in prominence" as active buyers, according to Pershing. In 2010, approximately half of all active buyers
other RIAs.
Although the average size of deals in the first quarter fell, were a larger number of acquired companies in the $ 250 million to $ 1 billion range, DeVoe said. The other side, making the average deal size down, is that active buyers also buy more small practices.
Pershing reported that 18 percent of all practices or merged 2010 was sold the assets of 100 million dollars or less. That is double the percentage of small offers tallied by Pershing in the years 2004-2009.
MOTIVATIONS
The main drivers of the buyers are the desire for new geographic markets, new services and specialist knowledge in areas such as trust and accounting, DeVoe said.
Dan Inveen, whose consulting firm Pershing FA insight composed the study, said financial considerations remain the principal motivation of most small sellers.
"Unless the owner of the desired resolution is a firm formwork, a kind of a sale, merger or acquisition is inevitable," he said.
An alternative to outright sale is for RIAs to buy holdings in rivals, especially if they fill a strategic gap.
"We see more of a networking trend place," said Mike Watson, Director of practice management solutions at TD Ameritrade Holding Corp., another major custodian for customers of independent advisors. "These RIAs are definitely interested in having conversations with each other."
(Reporting by Philipp Gollner, edited by Jed Horowitz)
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