The robust pace of mergers and acquisitions in the advisor space is causing many advisors to look for more stable broker-dealers, eFinancialCareers writes. And advisors looking to move to smaller firms this year may want to think twice, according to the publication.

The registered investment advisor space saw a 37% jump in mergers and acquisitions in 2015, with a record 123 deals signed, according to DeVoe & Co. data cited by the financial jobs site.

This year will be no different, eFinancialCareers writes. Earlier this month, the Lightyear Capital-backed Wealth Enhancement Group, which oversees around $4.5 billion in client assets, agreed to buy HHG & Company, which manages about $1 billion, as reported earlier.

The M&A boom is driven by smaller wealth management practices, independent broker-dealers and registered investment advisors feeling cost pressures arising from heightened regulatory scrutiny, eFinancialCareers writes.

Regulations such as the Dodd-Frank Act have imposed higher net capital requirements, says Sean Kelleher, president and principal partner of Wall Street Access, according to the website.

Meanwhile, increased scrutiny from regulators has created the need for more compliance and risk personnel, all of which in turn leads to cuts in other areas, according to the website. And while advisors don’t necessarily face the prospect of layoffs — as long as they bring revenue, that is — employee cuts in other areas of the practice, such as research, sales and trading, can hurt advisors’ ability to do business, eFinancialCareers writes.

Meanwhile, insufficient investment in infrastructure and technology at firms that need to cut costs will further hamper advisors’ work, the website writes.

These pressures have already led advisors to look to bigger firms, according to Howard Diamond, COO and general counsel of Diamond Consultants, the website writes.

Advisors in the broker-dealer channel want to work at well capitalized and stable firms, while fee-based advisors are looking to RIAs or hybrid firms, he says, according to eFinancialCareers.


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