Even as economic uncertainty slows mergers and acquisitions across much of the U.S. economy, industry trackers say they have good reason to believe wealth management will be the exception.
If there is any noticeable difference for purchase deals reached between wealth management firms, recent history suggests it will be modest at the most. Rather than a big dip in the pace of M&A, industry experts predict that the biggest consequence of tariff-driven economic turmoil will be the restructuring of deals’ basic terms.
Wealth managers showed little reluctance to engage in M&A in the first quarter of 2025, even as acquirers in other industries began to pull back the reins. The industry-tracking investment bank Echelon Partners reported last month that purchasers of wealth management firms got off to a “record-breaking start” this year with 118 deals announced in the first quarter. That made it the most active first quarter and second most active quarter overall since 2019, following the fourth quarter of 2024, according to Echelon’s figures.
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That happened in the same three-month stretch that the S&P 500 stock index was down by 4.6%. Amid “renewed tariff concerns and broader economic uncertainty,” according to Echelon’s April 2025 report, “the wealth management M&A market remained remarkably resilient.”
M&A’s (poor) prospects beyond wealth management
Contrast that with deals in the U.S. economy as a whole. The accounting and consulting giant EY reported last month that the total number of M&A deals worth $100 million or more in all industries fell by 8.9% year over year in March to 112. The total value of the money that changed hands was up from March 2024 — rising by a whopping 25% to $217 billion for transactions of $100 million or more.
But that increase was driven by a handful of “megadeals” valued at more than $5 billion each in the technology and consumer products industries. Among the reasons cited by EY for why a slowdown may be in the offing were the dimming prospects that interest rates will be lowered, flagging consumer confidence in response amid worries about an economic downturn and uncertainty about President Donald Trump’s tariff policies.
“Initial hopes for a strong M&A environment under the new administration have not materialized yet amid uncertainty over tariffs and other factors, resulting in many stalled or canceled deals,” EY wrote.
The lessons of recent history
Mike Wunderli, the managing director of Echelon Partners, said he sees no reason yet for similar anxieties about the wealth management industry. For reassurance, he looks back to 2020 and the early days of the COVID-19 pandemic.
Uncertainty caused by economic shutdowns sent the S&P 500 spiraling down in the first half of that year. Yet purchasers of wealth management firms logged 46 transactions in the first quarter of 2020 and 35 in the second, “which was a modest slowdown at most, particularly given that Q2 is historically the slowest quarter for announced deals,” Wunderli said.
“Then Q3 and Q4 marked the two most active quarters on record at the time, with 55 and 69 deals, respectively,” he added.
If this year’s volatility proves to be a repeat of 2020’s short-lived market decline, Wunderli said he thinks the effects will be “modest and temporary.” Even if “the U.S. economy experiences an extended, multi-year recession, we would certainly expect valuations and deal activity to decline, but only moderately,” he said. “There is still plenty of runway left in this consolidation cycle.”
At Steward Partners, one of many firms using private equity support to finance M&A deals, the queries from firms possibly looking to sell have shown no signs of flagging, said Scott Danner, an executive vice president and head of legacy.
“I’m seeing somewhere between five and eight, sometimes 10 leads a week,” Danner said. “I mean, I don’t have time in my schedule to meet with every single person that comes through.”
Danner noted that one reason advisors have for selling their businesses has nothing to do with the market. Many are looking to retire.
“It isn’t changing the problem in the industry,” he said. “We still have this epidemic where the majority of our industry is going to be turning over in the next 10 to 15 years because of the age demographic.”
Wunderli and Danner’s optimism is shared by other firms that help arrange deals. David DeVoe, whose firm specifically tracks M&A deals in the registered investment advisory industry, agreed a downturn could weigh on transactions.
“However, the structural underpinnings driving RIA M&A have not shifted, so the volume may decline but will likely continue to be stable,” said DeVoe, the founder and CEO of DeVoe & Co. “The crest of the wave may be lower, but there is still a wave of activity flowing over the industry.”
Just as Echelon found the first quarter of this year set a record for all wealth management M&A deals, DeVoe & Co saw the same happen in the RIA industry. DeVoe reported there were 75 transactions among registered advisors in the first three months of 2025, the highest for any first quarter in records going back to 2018.
Private equity sitting on plenty of dry powder
Some of the most prominent acquirers of wealth management firms are public companies with the ability to tap the stock market to finance their purchases. Publicly traded LPL Financial made a splash last month with its announcement that it plans to buy its former rival Commonwealth Financial Network in a deal valued at $2.7 billion.
But most transactions these days are instead driven by acquirers that draw their financing from private sources. In a report looking at 2024 as a whole, Echelon Partners found private equity firms played a direct or indirect role in just over 70% of the 366 transactions it logged for that year — setting yet another record.
All seven of the top acquiring firms listed in Echelon’s report on the first quarter have ties to private equity. They include Wealth Enhancement Group, which did eight deals in the quarter; Merit Financial Advisors, which did seven deals; and Mariner Wealth Advisors, whose five deals include its mammoth purchase of Cardinal Investment Advisors with $292 billion in assets under advisement.
Wealth management firms remain attractive prospects in large part because of their healthy profits. The consulting giant McKinsey reported in January 2024 that the average pre-tax margin for wealth managers of all stripes last year was 26%.
Wunderli said private equity firms have set aside plenty of capital — often referred to the industry as “dry powder” — for further purchases. That, he said, “should support healthy M&A activity for the foreseeable future, even during challenging times that typically quell M&A activity in other industries.”
Corey Kupfer, a lawyer specializing in merger and acquisition work for registered investment advisors, said history suggests private equity firms often go months without seeing a drop off in a downturn and then can recover faster than the general economy.
“They already have the dry powder they need to invest when it starts slowing down,” Kupfer said.
One way a downturn could foul private equity owners’ plans is by forcing them to wait longer to put firms they’ve acquired back on the market. Many private companies buy up businesses with the idea that they’ll be able to sell them a few years down the road after reducing costs and eliminating redundancies.
But few of the private equity players who have scooped up wealth management firms in recent years have gone on to find a subsequent buyer.
“If they want a sale to a larger PE firm or to bring in a PE firm to take them out, and if the cost of capital remains high, they are going to have trouble raising funding,” Kupfer said. “So they may want to hold on for a bit, or they may do a continuation of their fund.”
What falling markets mean for deals and sellers
On the side of potential sellers, economic volatility could cause some to move more quickly to seek the stability a large acquirer can bring. And since the purchase price of wealth management firms is often tied directly to the value of assets they have under management, a decline in the stock market could also make acquisition targets cheaper buys.
That latter result could prove a double-edged sword, DeVoe said. Although buyers may see better deal prospects, potential sellers may be reluctant to part with their business at what could seem a deflated price.
“Most advisors have little pressure to sell externally, so most will simply wait for the markets to come back,” DeVoe said. “Consolidators, however, will likely adjust their deal structures in an effort to encourage them to take action today.”
Brendan Kawal, a partner at the M&A consulting firm Advisor Growth Strategies, said buyers may respond to persistently high borrowing costs by offering less upfront cash for acquisitions. Instead of taking on debt to finance transactions, purchasers could begin taking larger ownership stakes in the firms they buy.
Such equity-heavy deals became more common during the 2022 market downturn, Kawal said.
“If you don’t want to put as much cash out the door, equity is a good way to do it,” he said.
Deals, he said, may also come to place greater emphasis on so-called earn-outs — or performance benchmarks acquired firms have to meet in order to realize a maximum purchase price. These earn-out benchmarks often call for retaining a certain number of advisors or increasing assets under management by a set percentage.
If values fall, some may choose to ‘wait it out’
Citing data from Fidelity Investments, Advisor Growth Strategies noted in its own “RIA Deal Room” report that the median purchase price for an advisory firm last year was 11 times its EBITDA — or earnings before interest, taxes, depreciation and amortization. Kawal said firms tend to be priced highly when they seem capable of “organic” growth, or boosting their revenues through asset management and advisor recruiting rather than M&A.
Firms with weak organic growth could see their values decline during an economic downturn and become easy takeover targets. Stronger firms, meanwhile, could benefit from economic uncertainty as investors turn to them for more advice.
“They have an interesting niche in the market,” Kawal said. “And, you’re probably not going to get much of a deal on those firms, because they’re going to say, ‘Well, we’ll just wait you out.'”
For Danner at Steward, the prospect of declining purchase prices could even contribute to heated M&A activity in the short term. That’s especially true for advisors who are on the cusp of retiring and are eager to get as much as possible out of their businesses.
“I think market volatility does something unique to financial advisory practices,” Danner said. “That is, it reminds them of how bad things can get quickly. And nobody wants to see their value drop.”
Market volatility tends to arouse anxiety even in professionals who are trained to always keep the long run in view, Danner said. That can lead to a desire to join a larger partner who can provide services like cybersecurity and human resources support and give advisors more time to spend with clients.
“Selling your business is not always logical,” he said. “Sometimes it’s emotional. It’s, okay, how many more years do I want to be doing this? How many more years do I want to do this without a partner? Do I want to just focus on my clients? And if that’s the case, how do I do that?”
