2025 largely noticed extra of the identical within the impartial dealer/supplier area, apart from one massive factor most advisors didn’t see coming: Commonwealth Monetary Community’s sale to LPL Monetary.
LPL closed on the deal in August, with the official conversion slated for the tip of 2026.
The transaction raises the query of what’s the subsequent domino to fall within the IBD area? Trade consultants and recruiters predict continued consolidation over the subsequent yr, with one other main acquisition or roll-up more likely to happen.
“Who’s the shock agency that nobody anticipated to be available on the market or to promote?” stated Louis Diamond, CEO of Diamond Consultants. “That’s the subsequent wave of this consolidation. There’s an excessive amount of cash chasing the area, and there are too many causes for the shareholders, a few of these companies to show down buyout gives from massive strategics like LPL, Cetera and the like.”
Total, Diamond stated the Commonwealth transaction was web impartial for smaller, boutique dealer/sellers. On the one hand, one in all their greatest opponents is now not available in the market. Alternatively, “each advisor is eternally going to be distrustful of companies that say, ‘We’re non-public; we’re going to remain non-public eternally,’” he stated.
Jodie Papike, CEO and managing companion of Cross-Search, stated the Commonwealth deal is a continuation of advisors’ rising distrust of companies. We’ve seen that with corporations that declare they’ll by no means promote, solely to vary their stance over time, she stated.
“Advisors have a common sense of not believing anybody,” Papike stated. “They don’t know the place the steadiness might be discovered. A variety of them don’t know what route they’ll go to, the place they’ll be part of a agency and know that it’s going to be the identical agency in 5 years, 10 years. So there’s a really heavy common sense of distrust within the business proper now.”
Most of the legacy IBDs have been established within the Eighties and Nineties, usually with a single proprietor or a few homeowners. As these homeowners method retirement age, they’re now confronted with the problem of getting no succession plan in place.
“It simply sort of turns into inevitable that they determine they’re able to promote it,” she stated.
Matt Lynch, managing companion of Technique & Assets, a monetary companies consulting agency, stated he doesn’t see a degree of distrust. However he does see that the mid-sized or boutique b/ds proceed to have a extra direct relationship with the advisor.
“The advisors like gaining access to the decisionmakers, and the bigger corporations, a few of them nonetheless have that, however a variety of them are inclined to work by massive OSJ or different intermediaries and don’t have fairly the identical deep relationship with the advisors that the IBDs have been recognized for thus a few years,” he stated.
Lynch added that the Commonwealth deal strengthened the worth of advisors having a relationship with senior administration, and this stays a aggressive differentiator for IBDs.
AI and the IBD House
Synthetic intelligence know-how might be one driving drive behind continued consolidation within the IBD area in 2026, Diamond stated.
“Tech has all the time been there, however I feel that is the subsequent massive punch record merchandise that companies are going to say, ‘Hey, we are able to spend $100 million to construct an AI system which will or will not be market main. By the point we construct it, it is perhaps out of date anyway. Or does it make sense to only reap the benefits of the place multiples are and simply hyperlink up with somebody that’s already doing it nicely or cross the funding requirement onto one other agency?’”
How IBD companies undertake AI and preserve tempo with the technological growth and R&D that include will probably be key. Diamond is already beginning to see advisors prioritize AI when contemplating a transition.
“Whether or not I need to go to a agency that lets me undertake varied AI instruments with extra freedom, or this agency has sort of solved it and has higher AI instruments that’ll make me extra environment friendly, that’ll be the clearest win that an advisor can have over the subsequent few years is how can I deploy AI in my follow to develop quicker, drive efficiencies, et cetera,” he stated.
Mark Casady, co-founder of Vestigo Ventures, govt chairman at FMG and the previous CEO of LPL, stated IBDs which can be AI-forward are more likely to excel in recruiting, profitability and general development. (To make sure, Vestigo, Casady’s enterprise capital agency, invests in a number of AI startups.) However AI just isn’t a scale sport, he stated.
“Now we’re going to begin seeing the advantages of AI, which is … extra about partnering with the appropriate companies to get your AI story collectively and your AI providing to present advisors and to potential ones,” he stated.
“It’s completely different than different applied sciences I’ve labored in the place you possibly can construct up that functionality in-house, and that was our technique at LPL once I was in control of it, and it has been their technique since then,” Casady stated. “However this can be a completely different know-how. You’ll be able to’t simply get the expertise, and the expertise could be very scarce. So that you’re truly higher off working with a companion. They’re trying to primarily lease their AI experience and lease it by utilization relatively than some overwhelming test.”
“We’re seeing a variety of very good, comparatively small IBDs and RIAs utilizing these know-how suppliers successfully, doing it by the drink, by the transaction or exercise, and once more, getting them web financial savings out of it.”
The IBDs have been slower to innovate on AI than RIAs, Casady added.
“They’d been working fairly quick, just like RIAs, after which they began to place in place processes for reviewing AI from a danger administration standpoint, which they need to do,” he stated. “However that’s actually slowing them down, in order that they’re going to wish to determine that course of out to allow them to transfer quicker.”
Blurring the Strains
One other development shaping the IBD area in 2026 is a continued blurring of the traces between the completely different channels. The truth is, there’s not a lot distinction between an IBD, a wirehouse and an RIA. Most rich households don’t know the distinction, Casady stated.
For instance, most of the massive IBD gamers have entered the enterprise of buying RIAs themselves. We’ve seen this with Kestra’s acquisition arm, Bluespring. LPL, Osaic, Cetera, Cambridge and Raymond James have began to do that.
“Why not go forward and use your capital within the areas that you just assume are going to be the perfect return?” Casady stated. “Buying to me is only a variation on the theme of the traces blurring between the normal channels and a need to develop. And if one strategy to develop is by buying an RIA follow, then you possibly can see the entire business doing that.”
It’s a technique IBDs can retain property that they could in any other case lose and acquire property they may not in any other case acquire by utilizing their capital, he added.
IBDs have gotten viable and sure patrons for his or her underlying practices, Diamond stated. They may develop into one thing like “walled gardens,” the place they cease letting advisors go away so simply.
Papike stated it’s extra in order that there are extra assets accessible from companies.
“They know what number of advisors are going to be retiring, and so they know to maintain these property in place, they’ve to supply financing and packages and be facilitators for these acquisitions,” she stated. “Possibly that’s the definition of a walled backyard: You have got it good the place you’re, so you should use these assets and be in good condition.”
Casady stated he didn’t agree with the “walled backyard” analogy, as a result of advisors have a lot energy. They’re those who’ve a relationship with the tip shopper, in order that they’re in the perfect place to dictate phrases.
We are able to proceed to count on the traces to blur, Lynch agreed. The IBD area has advanced a lot over the past 20 years; even the time period “dealer/supplier” doesn’t actually inform a enterprise mannequin.
“Should you have a look at what the definition of the IBD section was 20 years in the past, and we glance at this time, there are a variety of variations,” he stated. “It’s a sign that that section continues to evolve to maintain up with advisor and shopper expectations, and so they’re fairly nimble, supported with know-how and capital. Assume what it seems like 5 years from now, who is aware of, however I feel it continues to evolve to maintain up with the demand. That’s a part of the rationale for a reasonably constructive outlook going ahead.
