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Many banks plan to bolster their wealth management departments by creating or acquiring RIAs
September 2019, BOSTON - Merger and acquisition (M&A) activity in the U.S. wealth management industry has gained momentum and is positioned to increase over the next several years, likely driven by improving economic and regulatory conditions and the need to achieve scale. Nearly half (44%) of the bank and trust executives surveyed by Cerulli Associates, a global research and consulting firm, are considering M&A opportunities for their firms in the next 12 months. Furthermore, as wealth management continues to represent a key growth driver for banks, many are looking to acquire registered investment advisors (RIAs) to access and develop greater capabilities and advisory services.
Wealth management departments are attractive business lines for U.S. banks and trust departments. Balancing positive market and economic conditions, with a move toward fee-based business models, banks’ wealth management departments have achieved moderate growth over the past five years. According to Cerulli’s most recent channel sizing, private bank and trust companies manage more than $4.5 trillion in wealth management assets as of year-end 2018, up from $3.6 trillion in 2013, representing a five-year compound annual growth rate (CAGR) of greater than 4%.
In order to continue to achieve scale, Cerulli anticipates that banks will increasingly evaluate strategic M&A. More than two-thirds (36%) of banks surveyed plan to create or acquire an RIA practice in the next three years. Banks have an appetite to integrate RIAs into their existing networks due to their wealthier clientele and ability to cross-sell banking products,” says Asher Cheses, senior analyst at Cerulli. RIAs can also reap the benefits of this arrangement. Joining a bank provides ample resources, services, and capabilities that they didn’t have access to before being part of a larger institution.
While strategically merging with a bank or acquiring an RIA offers access to new assets, bank executives need a clear vision of the potential synergies before opting for the acquisition route. “Banks will need to approach the M&A market with a smart and effective strategy, from conducting due diligence to effectively integrating and generating synergies from the acquisition,” adds Cheses. As the advisory landscape becomes increasingly competitive, banks that can effectively pursue M&A opportunities will be better positioned to achieve scale, offset regulatory and service demands, and attract new clients.
Cerulli’s new report, U.S. Private Banks & Trust Companies 2019: Evolving to a More Centralized Approach, evaluates developments within the private bank and trust channel, including current and projected marketshare, portfolio construction and product trends, service/technology offerings, fees, and strategic M&A initiatives.
NOTES TO EDITORS:
These findings and more are from The Cerulli Report—U.S. Private Banks & Trust Companies 2019: Evolving to a More Centralized Approach.
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