Financial Advisors

Wealth Management Trends in 2023

Brandon Kawal

We speak with Advisor Growth Strategies Principal Brandon Kawal about what to watch in the registered investment advisor (RIA) and wealth management space and what’s expected in the coming years. Kawal also shares what advisors may want to keep in mind in 2023.

What themes will shape the RIA and wealth management space in 2023? 

The first is finding and retaining talent. The total population of financial advisors has hovered around 288,000 for several years, and large wealth management firms need the talent to grow. The firms with the best talent acquisition and retention strategies are most likely to do well in key areas such as organic growth and M&A success. 

The second is organic growth strategies. Wealth managers benefited from a fantastic market until 2022. Firms with a definable organic growth strategy that includes sales and deepening relationships with existing clients will separate from the rest.

Lastly, leaning into unique value propositions. It has become more difficult to stand out in a crowded wealth management industry. One way to accomplish this is leaning into the unique value proposition a firm brings to the market. This could be unique services, specific client channels, or client demographics. 

What does the current M&A activity in the RIA space look like? How does it compare to 2022?  

The tone has changed from pure aggression to cautious optimism. The RIA market set another record for volume in 2022 according to Fidelity. We expect this activity to continue because a foundation of supply and demand is in place that we haven’t seen in the last decade. Expect buyers and sellers alike to be selective in finding a partner and taking their time to execute a transition in uncertain times. 

RIA M&A is still active, and 2023 should be busy, but it will look different as buyers and sellers will need to collaborate more, meaning there will need to be a greater emphasis on “win/win” deal structures, long-term incentives and engaging a seller’s next-generation of talent. Valuations have remained competitive, but buyers and sellers will have to compromise and match what’s most important on both sides. 

What can we expect in the coming years? Will the same factors that impacted M&A in 2022 carry over to this year?  

In the short-term, we can expect lots of M&A activity in the RIA space. The market is still very fragmented and there is a growing separation between the biggest and the rest. RIAs can focus on organic growth, talent, and their value proposition to remain competitive and avoid leaving M&A as the only option.

M&A is likely to be impacted by the same factors in 2023. On the one hand, the tailwinds driving supply such as succession and the search for scale are still in place. Demand appears to remain on track, and institutional capital continues to search out opportunities. However, changes in the cost of capital and potential market volatility will shape deal-making conversations and require creativity from both sides.

What should advisors keep in mind in the new year? 

M&A isn’t solely about the “transaction.” It is crucial that all advisors realize that the M&A market provides insights into the competitive landscape in and informs best practices for running a wealth management business. It pays to be educated on what’s driving the market beyond headline valuations to ensure you remain competitive and maximize future options. 

This interview originally appeared in our TradeTalks newsletter. Sign up here to access exclusive market analysis by a new industry expert each week. We also spotlight must-see TradeTalks videos from the past week.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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