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We examine the ways in which two major forces at work in wealth management intersect, sometimes in unexpected ways.
Artificial intelligence and mergers and acquisitions are two of
the most influential trends determining the course of the wealth
management business. M&A transaction volume is
continuing to set records as consolidation intensifies and
valuations remain historically high, while implementing AI in
firms” workflows has become table stakes for the modern RIA.
But how exactly has one trend impacted the other?
Industry experts say that RIA sellers who have integrated AI into
their workflows, tech stack and data systems can enhance their
valuations by improving efficiency, margins and profitability, as
well as data quality.
In a seller’s market, however, what’s proving to be even more
consequential is the buyer’s ability to demonstrate it has
state-of-the-art AI that can differentiate them and attract
choosy sellers who want to partner with acquirers who have the
most growth potential.
“An acquirer who is up to speed on AI is solid
gold”
“Aquirers don’t care what the technology of the seller looks
like,” said veteran dealmaker Rush Benton, who now heads the
transaction consulting firm Gorman Jones. “They’re
going to put the acquired firm on their own tech stack and
platform anyway. But an acquirer who can demonstrate they’re up
to speed on AI and have the best platform as a result is solid
gold. They become much more attractive as a buyer.”
Not coincidentally, several of the industry’s largest firms, and
acquirers, have recently announced massive AI investments and
build outs. LPL
Financial has invested nearly $2 billion in “LPL Latitude,”
which will embed agentic AI into advisor workflows, Mariner is
spending $35 million on a five-year partnership with Humanity
Labs that will add 700 bots to an AI platform and Savant Wealth
Management is spending $50 million on a new operating system that
will add 1,000 “bionic agents” to its workforce.
“AI implementation that allows you to do more with less
people will make your business more valuable”
Sellers that are embedding agentic AI into their workflows are
also benefiting by “commanding a stronger valuation multiple than
less tech-forward peers,” said Harris Baltch, co-head of
investment banking for Dynasty
Financial Partners.
It’s possible that innovative sellers may have AI systems that
fill a void buyers don’t have yet, but the primary benefit for
sellers is being able to improve efficiency and margins, as well
as data quality and automating workflows, according to Baltch.
While having advanced AI implementation as a seller doesn’t
directly enhance value, “it can certainly indirectly enhance
value,” according to David Goldstone, manager of investment
research at Condor
Capital Wealth Management.
“If a firm’s AI implementation is allowing you to do more with
less people and time you are going to have superior margins which
will make your business more valuable,” Goldstone said. “If AI is
improving client outcomes and freeing up advisor time to better
serve clients, than your firm is likely performing well, winning
referrals, and growing faster.”
And if the acquirer also has a strong AI implementation,
employees who are already accustomed to using AI tools may be
easier to integrate, Goldstone added.
“Sellers are beginning to ask about buyer’s AI
directly”
M&A consultant Allen Darby, CEO of Alaris
Acquisitions, said he’s “never had a seller go to market
based on an AI-centric model. Creating such an environment would
take tens of millions of dollars over many years, and RIA firms
under $10 billion are simply not putting money toward that goal
at this time. They don’t even know how to think about it.
Therefore, today the AI premium is purely theoretical for
sellers.”
However, AI is making a big difference for acquiring firms,
according to Darby.
“I’m already seeing it,” he said. “In the areas which sellers
consider when selecting a buyer, AI is becoming a major factor.
Sellers are beginning to ask about AI directly. Buyers who excel
are those with actual AI integration that has generated tangible
returns on investment or scale within their organizations. These
buyers are spending tens of millions of dollars and it’s now
differentiating them in the eyes of growth-minded sellers.”
A buyer that can demonstrate superior AI capability has “a
differentiating advantage” when wooing sellers who are looking to
join a firm with the greatest growth potential, agreed investment
banker John Langston, CEO of Republic
Capital Group.
“The buyer’s platform matters more than the
seller’s”
For most deals, the buyer’s platform matters more than the
seller’s, because RIA consolidators are increasingly acquiring
smaller firms specifically to integrate them into a shared
operating infrastructure, replacing whatever proprietary AI the
seller already has, noted Dynasty’s Baltch.
That supports the “seller’s market differentiation” logic, he
said. “If a buyer can credibly say “join us and every advisor
gets AI-augmented research, drafting and portfolio tools on day
one,” that’s a tangible, forward-looking growth story for a
principal deciding where to land,” Baltch said.
Accordingly, AI capability is driving the growth narrative and
integration efficiency story, increasingly decisive in a seller’s
market, while seller AI maturity mainly drives current
profitability and de-risking in the deal itself.
“Both matter,” Baltch said, “but for different reasons and at
different points in the negotiation.”