The increasing level of M&A activity in the advisory space is drawing in firms serving the need - they say - for help and capital.

Advisory firm and broker dealer LPL Financial has rolled out solutions which it says help businesses grow via acquisitions, tapping into the brisk M&A trend in US wealth management. This move comes as a number of organizations have sought to ride this trend.

LPL said that advisors trying to acquire other businesses can use an “end-to-end solution designed to make it easier to maneuver through the multiple, complex steps of a deal”. Also, LPL is building a “portfolio of succession solutions” for advisors protecting their business value.

“The M&A process is complex, and without experience, advisors are susceptible to spending unnecessary time and money,” Greg Cornick, LPL Financial executive vice president, finance and head of Advisor Financial Solutions, said. “Advisors will have a single point of contact who can guide them through the deal process, including valuation, deal structuring, diligence, contracting and transitioning, with the goal of creating a smooth and cost-effective experience for both buyer and seller.”

M&A in the registered investment advisor space, for example, has been brisk in recent quarters. ECHELON Partners, an advisory firm working with wealth firms over deals, said there were 52 completed deals in the second quarter of 2019, beating 49 in the first quarter. On current trends, it projects that more than 200 deals will be completed. 

Rising compliance costs and a desire by some advisors nearing retirement to exit are deal drivers. Advisors who want to build scale are also M&A players. As ECHELON noted in its report issued in july, average deal sizes have risen. In Q2, Wells Fargo sold its $827 billion (AuM) Retirement & Trust planning business to Principal Financial Group for a reported $1.2 billion. United Capital sold its $25 billion (assets under management) business to Goldman Sachs a few weeks ago.

Protection
LPL said it is publishing solutions so that its advisors can monetize their business if there is an unplanned exit. Additionally, advisors will be able to access capital and resources to help them plan their succession or be able to monetize their business when they are ready.

The firm said advisors also have access to capital from LPL for growth goals, such as borrowing through CFO Solutions, part of LPL’s suite of business solutions, which partners advisors with an LPL expert for financial planning and the ongoing management of their business.

Other businesses are tapping into M&A and business development demand. In June, Dynasty Financial Partners, the US firm that works with breakaway advisors, introduced a new loan facility for organizations going independent. It is called the Dynasty Freedom Note.

The development of such an offering comes at a time when advisors are continuing to defect from large banks and wirehouses to set up on their own. They often need capital infusions and want to avoid losing the independence they have tried to get in the first place. (This publication explored some of the drivers here.)