High Debt and Advisor Losses Threaten Large RIA Aggregators

Morningstar DBRS analysts Shaima Ahmadi and Timothy O’Brien wrote in a June 1 note that fast-growing registered investment adviser aggregators face elevated leverage, complex post‑merger integration and the risk of advisor and client departures.

The note said combined assets under management for the rated RIAs rose about 32% on average over the past three years as record deal volumes and high valuations drove rapid scale. The analysts reported average leverage of about 8.1 times EBITDA, a four‑year low for those rated firms but high compared with traditional investment managers.

Morningstar DBRS highlighted that many acquirers are sponsor‑backed and take on substantial upfront debt, which can keep leverage elevated because deleveraging depends on how quickly acquisitions generate synergies and whether management slows further dealmaking. The agency also pointed to the difficulty of combining many small, independent advisor teams into a single operating platform while advisor compensation remains the largest variable expense and can limit margin gains.

The note named Hightower, Mercer Advisors and Corient (formerly CI Private Wealth) among the rated firms and cited recent episodes including a 2022 ratings downgrade at CI Financial, litigation involving Mercer and founders of an acquired firm, and Hightower’s 2023 strategic realignment and increased centralization through Hightower Signature Wealth. Morningstar DBRS said such cases illustrate how management capacity, systems readiness and integration sequencing can become constraints when acquisition activity outpaces operating capability.

Analysts wrote, “Deleveraging must occur,” and added that “execution matters,” placing weight on post‑close evidence such as stable leadership, limited client disruption and steady asset retention. The note warned that advisor departures can quickly translate into lost assets under management and client attrition if acquired teams do not integrate or if compensation and cultural expectations diverge after closing.

Eric Amar, founder and CEO of Accelerated Wealth and a former chief growth officer at Focus Financial Partners, warned that a weaker economic backdrop combined with high debt and unhappy advisors could create rapid problems for firms assembled mainly by dealmaking and financial engineering. He described his firm’s approach as taking minority stakes in a small number of wealth businesses with dedicated capital from J.C. Flowers.

Morningstar DBRS said it will track whether aggregators add specialized services for high‑net‑worth and ultra‑high‑net‑worth clients and whether dealmaking improves advisor productivity and operating margins. The rated RIAs referenced in the note range in size from roughly $20 billion in AUM to several hundreds of billions.

With deal activity and valuations still elevated, the agency said balancing the pace of acquisitions with operating capacity and moving to reduce leverage will shape how resilient large RIAs are to an economic slowdown or waves of advisor departures.