The Federal Reserve's decision to raise its benchmark interest rate to a range of 3.75% to 4% is set to cast a shadow over the red-hot RIA mergers-and-acquisitions market, potentially cooling both deal volume and valuations. The unanimous 12-0 vote by the Federal Open Market Committee marked the first hike since July 2023, reversing a period of easing that had fueled a record-breaking M&A spree.
Michael Gray, a partner at Chicago-based law firm Neal, Gerber & Eisenberg, who leads its private equity and fund formation practices, said the move will reverberate through the wealth management deal landscape. "I for sure think that the increase in interest rates last week and the hawkish implications by the Fed will have an impact on the volume of deals as well as on pricing," Gray said. "There's no question that higher rates and the specter of higher rates will more likely than not push the price of deals down."
The RIA sector has enjoyed a prolonged seller's market, with dealmakers on track for a record year. Echelon Partners projects that 2026 will see approximately 500 transactions, surpassing the previous high of 466 set last year. However, Gray cautions that the rate hike could inject friction into this momentum. "In this particular space, there's so much capital chasing deals, and the prices, even over the last two or three years, have gotten higher and higher with more and more favorable terms to sellers," he said. "It could still be that there's not much impact in this space, but my gut would be it will certainly have some impact."
The rate increase reverses a tailwind that had been supporting deal activity. DeVoe & Company's 2025 Annual RIA M&A Outlook noted that a series of rate cuts and market stabilization in late 2024 reignited transaction momentum, with 54% of RIA leaders expecting deal volume to rise in the following 12 months. Now, with borrowing costs climbing, buyers may need to adjust their strategies.
Rollover equity as a pressure valve
Gray does not anticipate a fundamental shift in the typical deal structure, particularly for add-on acquisitions, which dominate the market. "Generally, an RIA deal is money upfront, money for retention of clients and an earnout based on growth of the underlying client assets under management," he explained. "The big volume is in add-on acquisitions. I don't necessarily see that structure changing."
Instead, he expects buyers to lean more heavily on rollover equity—the portion of a seller's proceeds reinvested in the acquirer's equity. "One thing you could see is buyers asking for more rollover, and then they come out of pocket with less cash, which means they've borrowed less and given more, hopefully, upside to the seller in valuable rollover equity," Gray said. "There are levers besides valuation that can be turned in a higher rate environment. The easiest one, if the sellers are willing, is to still pay a high multiple but ask for more rollover."
Why gravity may come for the largest RIAs
For firms wondering when lofty valuations will finally correct, Gray argues the impact will be uneven. "If you're a $4 billion RIA, growing at 12% a year and you've got a young team, you're going to get paid a fortune for that business," he said. "Where the gravity likely will kick in the most is, I think, at the very largest RIAs that may not have organic growth and where there are few buyers big enough to buy them."
These mega-deals typically require acquirers to borrow heavily, making them most sensitive to higher financing costs. Gray pointed to some of the largest RIAs, which are valued at low to mid-20 times EBITDA. "That's probably the most logical place if they want to sell and they're marked really high," he said. "Now rates are higher and somebody needs to buy them. Can they run those numbers when they're going to borrow however much to do that acquisition?"
Buyer depth is already a constraint at the top end. Fidelity's midyear M&A report found that the median size of acquired RIAs rose from $517 million to $630 million in AUM, while client assets involved in M&A jumped 88% to $343 billion, even as deal count fell 9%. "If the seller's enterprise value is $10 billion, there's not that many buyers out there," Gray said. "They're great businesses. There are just fewer buyers."
The upshot for growth sellers
For younger, growth-focused teams, Gray suggests that a modest discount may be acceptable if a larger platform provides scale and relieves administrative burdens. "They may be very willing to take a slightly lower price because of the higher rates, because over the long term they're going to make a lot more money," he said.
Regardless of how rates affect deal terms, Gray stresses that price should not be the sole consideration. "At the end of the day, the most important thing for all of these people is to pick the right partner," he said. "If they sell to or partner with the wrong firm and it's a bad fit for both sides, they're in trouble regardless of the multiple and terms."
