Posts Tagged Stephen C. Winks

M&As: A Successful Trust Business Can Sweeten the Deal

Banks are eager to acquire registered investment advisors again, firms offering trust services are more attractive.

Pershing’s New Report “Real Deals 2009” suggests 2010 will be a good year.

This week the news services were filled with stories about mergers and acquisitions once again. One reason was the December 9 release of the Pershing Advisor Solutions (PAS) and FA Insight study – “Real Deals 2009:  Definitive Information on Mergers and Acquisitions for Advisors.” It’s now available for download at  

Mark TibergienThis morning, The Trust Advisor interviewed Mark Tibergien, Pershing Advisor Solutions’ CEO, at his office.  We wanted to know what M&A activity has meant to the advisor community this year.  In addition to discussing the current state of M&A 101, we explored what edge an advisory firm might have for acquisition with a solid trust business under its belt.

Tibergien said that having a trust operation as part of an advisory business “does potentially help.” He added that a trust operation gives the advisor “access to the will vault.”  This translates into two distinct benefits for the RIA practice.  First, accounts are likely to remain loyal because once trust relationships are created with a family they usually hold firm. 

Second, advisors with a trust operation possess a blueprint on the direction of future generations.  Knowing that future in advance via the trust instrument will give the advisor a clear picture of what’s to come after the client passes away.

Advisors without trust services who manage family money have an 8 out of 10 chance of being fired by heirs after their client dies. The Trust Advisor Blog reported on this phenomenon last September in:  Does a Client Have a Life After Death?

Our article presented compelling evidence that providing trust services along with investment advice greatly reduces the likelihood of an advisor being fired by the new generation.

Fiduciary expert Stephen C. Winks said this week that the advantage of trust powers for an RIA are extraordinary.  But he cautioned that it wouldn’t make sense for an RIA to buy a trust company.  “It would be cheaper,” he said, “to create their own trust company.”

Middle Market Merger Mania

Pershing Advisor Solutions’  Tibergien reported in his third annual study on M&A activity that, while the volume of transactions in the RIA sector is down this year, a new trend of mergers among RIA firms and a decline in financial buyers has emerged.  The study showed that In the first nine months of this year, 31 transactions were recorded–a pace similar to the 44 in 2008. But this is still well off the 67 that took place in 2007.

Transactions between RIA firms became the most common form of deal in 2009, accounting for more than 45% of all transactions year to date. In 2008, RIA-to-RIA deals were less than 29% of all deals, and in 2007 they were below 24%.

“The key takeaways [from the study] are that there still is a lot of interest in transactions, but the volume has come down a lot. Most of the activity is tilting toward an RIA-to-RIA transaction and away from serial, or financial, buyers,” Tibergien said. “Most people who are looking at deals are focused on the compatibility of the organization and not just on the financials.”

Tibergien explained that the market disruption over the past 18 months froze capital and forced firm financial buyers sit on the side lines. In his opinion, the financial crisis also opened RIA firm owners’ eyes to the fact that they could achieve economies of scale, meet staffing needs, and establish a better market presence by merging with another RIA firm.  He also noted that clients’ concerns about succession following aging owners could be eased through merger.

“I think, however,” he predicted, “there are a lot of pressures in the marketplace today that probably suggest that RIA-to-RIA consolidation will continue unabated for the next five years.” He added that most of the activity would be in the middle market: firms with $200 million to  $2 billion in assets under management.

Banks are Buyers Again

Paul LallyPaul Lally, a mergers and acquisitions consultant based in Pennsylvania, says banks are looking for differentiators in the marketplace – to bring a certain cache to their wealth management business.  The banks his staff has worked with have retail groups and are successful with the affluent customer.  But they are looking to expand their high net worth business.  Lally has found that the banks typically don’t have a high net worth platform, offering financial planning, tax planning, and investment advisory services.

The firm Lally was working with was a wealth management firm acting in high net worth space, with average customer investable assets of $1 million.  Lally said “banks have come back to the table once again but in a different way.  Several years ago banks would come to a wealth management company and just buy it with no questions asked.”

But that all changed since banks have been branded as “wasteful spenders” in the media this year. They have an appetite, but there is no longer a panic to buy. There is no longer a “Las Vegas marriage” where you get married one day and divorced the next.  This time, deals are carefully scrutinized and must be approved by both one or multiple parties in the bank and several committees.  They take longer and are more careful.  But when a bank sees a strategic fit, the bank will likely acquire the firm.


The future looks bright. The New Year will likely be a promising period for RIA to RIA mergers with firm seeking both synergy and compatibility.  There will be a courtship period and then a marriage planned to last, not divorce Vegas style.  To ensure longevity, as Tibergien put it, the seller must have “his skin in a deal.”  There will be no more quick and easy deals where the seller can simply take the money and run.

Jerry Cooper, senior editor, The Trust Advisor Blog.

, , , , ,

No Comments