As mergers and acquisitions activity in the registered investment advisor space continues to break records, the RIA channel looks much different than just five years ago. As of the end of 2023, there were some 12,000 advisors affiliated with RIA consolidators, up from 4,000 in 2018, according to a recent report from Cerulli Associates.

“What we’ve seen is these large RIAs have built out such significant platforms that they have access to competitive advantages that previously RIAs weren’t known to have,” said Stephen Caruso, associate director at Cerulli. “They’re really building out these full-service wealth management businesses that are client-centric, built on giving advisors more tools to help them grow.”

Cerulli has identified 28 consolidator firms that are active and growing in the RIA space. That includes Creative Planning, Mariner, Savant Wealth, Cerity Partners, Hightower, Steward Partners and Corient, to name a few.

As these consolidators mature and gain scale, Cerulli said they are increasingly shifting their focus toward centralization to drive growth. They’ll combine services, such as investment management and financial planning.

“The ongoing shift toward centralization in the RIA channels has become reminiscent of the large broker/dealer and wirehouse characteristics from which many advisors departed,” Cerulli stated in its report. “The largest platforms are highly centralized and integrate acquisitions into a one-brand, one-firm philosophy. This approach can be challenging for some firms but presents significant opportunities for scale and growth.”

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Some firms have centralized under one brand from the start, Caruso said, including Mercer Advisors and Creative Planning. Others started with discrete, individualized RIAs and are moving toward a centralized model, including the legacy Focus Financial firms and Corient Private Wealth.

Many consolidators centralize investment management, with internal teams led by a chief investment officer. They take different approaches, such as having recommended or approved lists, building models internally or partnering with third-party model providers or asset managers.

When asked about consolidators’ most valuable services, just 25% of advisors cited centralized investment management as a top service. Advisors consider compliance guidance and ongoing support (58%), integrated tech platform (55%) and advisor succession planning (50%) as the most valuable services.

“We do see that in more centralized models, advisors are typically more concerned with giving up that independent ability to run their business or have more autonomy,” Caruso said. “But even with that, there can often be services and benefits that outweigh those challenges, that outweigh those concerns because of the force multiplier for the advisor that’s joining, and that gives them more resources, more capacity and a different model from within to grow.”

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Advisors cited a loss of autonomy (52%) and independence (51%) as the top two concerns when joining a consolidator. Those concerns were followed by transition operations (45%), client resistance to the move (36%) and lost revenue during the transition period (30%).

Cerulli data shows that advisors continue to move toward independent channels, seeking higher payouts, ownership of their books, and freedom of choice in platforms and investments. The insurance b/d channel is expected to lose the most advisors over the next five years at a 3.2% market share loss, according to Cerulli projections. That’s followed by the retail bank b/d, wirehouse and hybrid RIA channels. The independent RIA channel is expected to grow its market share of advisor headcount by 3.6% over the next five years.