Is the Advisor Age Wave Coming in 2022?

Mergers and acquisitions activity in the financial advisory space has steadily increased over the past five years. Much of that activity has been fueled by an increase in access to capital, sophistication in business acumen among practice owners, and media coverage of M&A deals. These conditions have created a surplus of buyers in that space resulting in a “seller’s market.”

For the last decade, many experts have been predicting a surge of retiring advisors hitting the market which would tip the scales and increase the supply of practices available for purchase. However, what we’ve seen instead is advisors holding on to their practices and working later in life, well beyond the typical age of retirement. This is especially true among solo advisors and small team practices, where the senior advisor continues to focus on his or her core clients and either downsizes their existing client list or reduces their client acquisition activities to maintain their preferred client base. These advisors can continue serving clients they enjoy while generating steady income and purpose for themselves.

As the pandemic continues to rage on spurring radical changes in the industry and the world, many believe these changes will create the market pressures necessary to drive older advisors toward retirement. The bulk of advisors are over the age of 65. With clients and staff pushing for remote work and virtual tools, these advisors will have to invest in and adopt new technologies and processes to adapt to the new way of working. The advisor industry had successfully resisted this push for many years, but now that clients are demanding digital solutions it has become a matter of “adapt or retire” for many. Coupled with the uncertainty of the pandemic, advisors, just like those in other industries, are feeling the urge to leave the workforce and enjoy life.

As a result, many experts feel that we are at the precipice of the encroaching age wave, which will continue to rise and eventually peak by the end of the decade. Although much of the focus has been centered around large-scale acquisitions and private equity, we believe that the bulk of the M&A activity over the next ten years will happen among small and mid-sized practices. These smaller firms can compete thanks largely in part to the increase in specialty lenders providing capital and a growing number of service providers offering affordable M&A consulting services and support. As a result, we believe the expected surge of practices for sale from aging advisors will be met with a large and robust pool of buyers empowered by advisor-centric lending partners and education around M&A best practices.