The Changing RIA Landscape and What Advisors Need to Know

Mergers and acquisitions are one of the big trends in the advisory industry this year and, despite the COVID-19 pandemic, they show no signs of slowing down. Paired with the continued growth of registered investment advisor (RIA) firms, these trends signify a shift in the opportunities available for advisors.

We recently sat down with Shirl Penney, president and CEO of Dynasty Financial Partners, to find out how growth and consolidation are affecting the industry and what RIAs need to know about the changing landscape. Check out the full video below and read on for more insights from our conversation.

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Advisor Migration and the Growth of RIAs

The move away from wirehouses isn’t new, but it’s important to note that the current climate is helping to accelerate it. According to Penney, the shift to remote work and the rise of new advisor technologies are making it more cost-effective for advisors to move toward an RIA or hybrid model. “That movement has been accelerating dramatically over the last 10 years. We built Dynasty Financial Partners to take advantage of those macro trends and to build resources and capabilities to power the best advisors to take better care of their clients,” he says.

Two other things that are likely to be affected by this migration are a decreased need for real estate and a shift toward hiring a more diverse team of employees. “We’ve seen an acceleration toward RIAs downsizing their footprint or completely giving up their real estate and going 100% virtual,” says Penney. Hiring candidates from around the country fits in with this. Rather than having to look for talent within the same city, firms are now increasingly able to source candidates from around the country and to ensure that they’re able to find the best fit for each position. The dual upshot of these changes is clear: lower real estate costs and a wider pool of candidates.

M&A Opportunities Are on the Rise

We’ve covered mergers and acquisitions closely this year—and for good reason. After a slowdown in the second quarter, M&A activity is reaching record highs and providing new opportunities for advisors.

“It’s definitely still a seller’s market,” says Penney. He also emphasizes that recent market trends have created the perfect environment for many of these deals to move forward as advisors look to capitalize on emerging opportunities. “With the market coming back as quickly as it did, there were a lot of advisors who were worried that they missed their opportunity, so there’s a new sense of urgency,” he explains. The combination of increased urgency and more favorable market conditions is helping to boost the momentum of mergers, creating new opportunities along the way.

The Bottom Line

Despite a tough year for the markets, independent advisors are well-positioned to weather the storm and new resources developed by companies like Dynasty are making it easier to keep costs down while providing high-quality services. While it’s hard to predict what will happen in the months to come, more consolidation and continued growth for RIA firms are very likely.