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Rolling up registered investment advisors (RIAs)
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Roll-Up Playbook: Registered Investment Advisors (RIAs)
WealthManagement.com
State of Play
The registered investment advisor (RIA) industry kicked off 2025 with record-breaking M&A activity, as 43 deals—representing nearly $340 billion in assets under management (AUM)—were announced in January alone.
Private equity has been the dominant force behind this surge. Fidelity reports that PE firms and their portfolio companies accounted for ~90% of RIA transactions in 2024, a dramatic increase from just ~40% in 2016.
This week, we’re taking a deep dive into private equity’s track record in wealth management—particularly in RIAs—to explore what’s driving the continued consolidation in this space.
Investment Thesis
Before the 2000s, the investment advisory market was largely dominated by broker-dealers like Merrill Lynch, Morgan Stanley (formerly Smith Barney), and Wells Fargo Advisors. These firms employed armies of advisors who earned commissions based on the financial products they sold to clients.
In contrast, Registered Investment Advisors (RIAs) operate independently of brokerage firms and are held to fiduciary standards, meaning they must act in their clients’ best interests. Instead of earning commissions, RIAs typically charge a percentage of assets under management (AUM) or a flat fee.
Starting in the early 2000s, regulatory shifts and growing consumer demand for transparency and personalized services fueled the rise of RIAs. The 2008 Financial Crisis was a major turning point, prompting many investors to move away from commission-based models in favor of fee-based, fiduciary-driven advisory services.
Source: Willis Johnson & Associates
The rise of online brokers like Schwab, E-Trade, and Fidelity in the 2000s introduced lower-cost, self-directed trading platforms, allowing investors to manage their portfolios with minimal reliance on traditional brokers. As a result, many advisors at brokerage firms transitioned to the RIA model, where they could focus on providing holistic financial, tax, and estate planning services rather than just selling financial products.
These industry shifts set the stage for private equity’s first major foray into the RIA space. In 2012, Lee Equity Partners took Edelman Financial Group private in a $257 million deal. Just three years later, in 2015, Lee Equity sold Edelman to Hellman & Friedman for over $800 million, marking a highly successful exit. Hellman & Friedman was already familiar with the space, having invested in broker-dealer LPL Financial in 2005.
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