For those of you who have been in the business world for over 20 years, here is a great test. Are you able to remember the Big 8 accounting firms from the late 80’s, early 90s? Yes, just 30 short years ago, the Big 4 in accounting / audit were the Big 8. And up until that time, they existed for years harmoniously.

Here is a great challenge for you. Can you name the Big 8 of accounting? The first 3 – 4 are easy, but then they get more tricky, and some of them are so surprising you may never get them. After you have wracked your brain, click the link to see who the Big 8 was and who they are now Back in the day, it was the Big 8 of Consulting. Big 8 Accounting Firms | The Consulting Experts | Consulting Prep

Mergers and acquisitions are no big surprise, but of interest with the Big 8 to the Big 4 is the compressed time it took to go from 8 to 4. The majority of the Big 8 firms had history going back to the 1800’s to early 1900’s, surviving independently for up to 150 years. However, in looking at the merger data, all of the merger activity happened within a 13-year time period between 1985 and 1998. So, why did up to 150 years of history get erased in the span of 13 years?

“So, why did up to 150 years of history get erased in the span of 13 years?“

Now, we fast forward to the present and look at another industry that is facing much the same possible fate, the Registered Investment Advisor space. The expansive growth of this space was a result of the tech bubble of the early 2000’s and the housing crisis of 2008, leading to a lack of confidence in the large brokerage firms and self-directed investments and the increasing information available on different investment strategies. Add to this the increase in interstate commerce, and the RIA space was ripe to grow at an alarming rate.

After many years of growth in this space, we are starting to see a new trend – a consolidation of the overall assets. And while we continue to see a rise in the number of individual RIAs, the number of new companies are beginning to decrease. Ultimately, three new trends have emerged that have changed the look of the RIA growth.

Consolidator Acquisition – This is the largest new trend in the space, with new RIA consolidators beginning to acquire large portions of the RIA space. These consolidators increase the marketing reach of independent RIAs, offer contemporary technology and create a larger market due to their brand recognition and name. In exchange for these benefits, they accept some of the independent RIAs profits and increases in the independent RIAs branding will ultimately help the consolidator.

Independent Growth through Acquisition – Contrary to the consolidator strategy, many independent RIAs have begun acquiring smaller RIAs. In a recent example, I was talking to an independent RIA with $1.2B in assets under management that had acquired a much smaller RIA with $100MM in assets under management. While the increase in the overall AUM for the acquirer was insignificant, the benefit was being able to enter a territory with an established team and an established office without the headache of set up and new market entry. For the smaller RIA, the benefit was a guaranteed income stream and the ability to grow with a larger team that had an independent Chief Investment Officer. For the acquired RIA, giving up the brand they had created and their overall independence felt like a fair trade for the guaranteed income.

Independent “Organic” Growth – The original growth strategy that has seemingly become the minority is assets under management growth through organic means. These independent RIAs have decided that their brand promise and value statement are unique enough to attract new investors without all of the benefits of a larger company. Additionally, RIAs in this category have a high level of confidence that investors need differentiation in the investing space to get away from the “sea of sameness” with packaged products and model portfolios cloaked as true portfolio management. The challenge for these RIAs is to create brand awareness with prospective clients which can be accomplished through referral networking and increased advertising and communication.

Regardless of what type of strategy an RIA takes, the importance is still placed on making sure that the original brand is evidenced in the evolution of the company brand. For those that become part of a larger consolidator, they will need to have a strategic plan to ingest the original brand into the new brand. For those that are growing through acquisition of smaller RIAs need to have a strategic communication plan to help the acquired clients holistically understand the value of the larger company and how this helps them meet their investment and wealth management goals. The independent growth RIA strategy will require continuous investment in how they will differentiate their and how they find new clients that have like goals and values.

Enlighten Fractional has experience in working with all of these different strategies. For help with this topic, feel free to contact us.