It may be a sweltering summer, but the pace of wealth sector M&A is cooling down. 

The North American merger and acquisition story for RIAs will witness its first full year of decline in nine years of successive increases, suggesting that higher rates and economic uncertainties are weighing on activity.

Figures from DeVoe & Company, a business advising on and tracking trends in the space, said a total of 57 transactions took place in the second quarter of 2023, falling from 67 a year ago. The 15 per cent drop was caused by an “unusually light” June and the third consecutive quarterly decline over the same quarter in the previous year.

With total transactions at 120, the first six-month period of the year is 11 per cent under the 135 recorded for the first half of 2022.

“Both buyers and sellers are a bit more timid in the current market. The macroeconomic conditions of high inflation, continued high interest rates and longstanding uncertainty in the economy and financial markets are likely weighing on the industry’s M&A activity,” the DeVoe report said. “Stock market volatility and a high/increasing cost of capital have a nature dampening effect on RIA M&A activity.”

“Given the slow start of M&A activity for the year and expected persistence of the macroeconomic conditions, it is unlikely that 2023 will be another blockbuster year. The first annual M&A decline in nearly a decade may be upon us,” it said.

For years, a desire for economies of scale to manage rising client expectations, technology spending and compliance burdens have been a force for M&A. Another force is owners’ wanting to exit the business as they reach retirement – the average age of wealth advisors in North America is in the high 50s. Private equity firms also see wealth management as a lucrative and sticky source of revenue amidst vast inter-generational wealth transfer. 

US correspondent Charles Paikert, meanwhile, recently wrote about the business strategy of Bluespring Wealth Partners, and what it says about the M&A story.