While some people still believe that convergence is a fad, based on a recent LinkedIn survey, they are in the minority. A more valuable question is which firms are implementing the convergence of wealth, retirement and workplace benefits and how it is changing the advisor M&A market.

Briefly coming out of hibernation, in a recent time 401k coffee session, Dick Darian, aka The Wise Rhino, discussed how RPA M&A took off overnight, why it happened, and how convergence is playing a key role.

Darian noted that there was a perfect storm in 2017-18 following what happened with Institutional Investment Consultants, which experienced consolidation but also moved from consulting to OCIO due to margin pressure. Some RPA firms had achieved scale, aggregator firms were forming driven by PE money, and adviser demographics led to an uptick. The poster child was the sale of Sheridan Road at the Hub in late 2017, achieving higher ratings than most could have imagined.

While still in the early stages of the consolidation curve described in the Harvard Business Review compared to record holders and IICs, the RPA market is maturing but struggling to serve and leverage the millions of plan participants they manage. It is the promise of participant engagement that has not only led to higher valuations, but has lured several RIA firms such as Creative PlanningMariner and Carson to be interested in DC's plans.

And while convergence may not be a fad like ESG investing, Darian noted that it's difficult to difficult to execute with only a few like Captrust successful. “It's easy to buy firms,” ​​Darian said. “Can Firms Integrate and Execute on Convergence?” He said the few firms that do will put pressure on others, especially smaller independent firms, as they lower plan-level fees. Fielding Millier, as early as 2018, stated at the RPA Aggregate Roundtable, “Our participant fees undercut our plan fees.”

Along with pricing pressure and rising valuations, convergence has driven more RPA aggregators to buy wealth firms under the Captrust model, with some RIA aggregators buying RPA practices.

The existential question is which type of firm is better positioned to profitably serve DC participants, if an RPA is better off joining an RIA aggregator with better wealth tools and understanding, as well as referral opportunities , and whether an RIA should join an RPA aggregator with millions of participants.

DC plan sponsors are looking for financial wellness, most don't know what that means. After all, they want to help the 97% of participants without access to a personal advisor. Darian noted how difficult it can be for advisors to make money for financial wellness and less affluent participants. While RIAs may be more adept at working with individuals, they haven't been able to scale that advice.

So when an RIA or RPA starts thinking about succession planning either because they can see the finish line, take money off the table or want to be more competitive, they have three decisions:

• Should they sell and when?
• Who to sell to?
• What advisor or banker should they hire?

Just like plan sponsors who spend little or no time searching for an advisor, perhaps their most important decision, advisors make the same mistake. There are some bankers that focus on RPA, and there are many more that focus on RIA. Which banker they choose may be their most critical decision.

As the convergence of RPA and RIA M&A shifts and heats up, advisors must act, if only to investigate and perhaps decide that the timing is not right. As TPSU has done with the plan sponsors that help them perform RPA Due Diligence and RFPsTRAU is now engaged with advisors to help guide them through what may be the most important business decision they will ever make.