The rate hike will reprice RIA deals in cash, not multiples

The Federal Reserve raised its policy rate to a range of 3.75% to 4% last week, a unanimous 12-0 vote and its first increase since July 2023 after a December 2025 cut and a hold at 3.5% to 3.75% since, and the RIA consolidation wave just became one more corner of the economy where financing costs more. Michael Gray, a partner at Neal, Gerber & Eisenberg who leads the firm's private equity and fund formation practices, told InvestmentNews the effect would land on both the number of deals and their price: "There's no question that higher rates and the specter of higher rates will more likely than not push the price of deals down."

Nothing in the current count contradicts him yet, which is the awkward part for anyone trying to trade on it, because Echelon Partners projects roughly 500 transactions for 2026, eclipsing the 466 that set the industry's prior record last year.

Deal counts lag the conditions that produced them, so this year's tally was substantially underwritten before the Fed moved: a mandate signed in the spring against a cost of capital that no longer exists still closes in the fall. The answer for the 2027 pipeline is being written in the mix of consideration rather than in the headline multiple.

Gray describes a transaction built from three payments with three different sensitivities: money upfront, money for retention of clients, and an earnout based on growth of the underlying client assets under management. Upfront cash is the piece a buyer funds at the marginal cost of money, while the earnout is the piece he hopes to pay for out of the growth it buys. Gray does not expect that architecture to change, in part because the deals that carry the volume are the small ones: "The big volume is in add-on acquisitions," he said, "and I don't necessarily see that structure changing."

What he does expect to change is the mix, with buyers leaning harder on rollover equity—the slice of a seller's proceeds reinvested in the acquirer's own stock rather than paid out in cash.

That is where the rate hike shows up first, in the line item least visible in the multiples that get passed around a conference. A seller who takes part of his proceeds in the buyer's equity has not sold at the headline valuation; he has sold at the cash price and made a bet that the buyer's multiple holds through his own hold period. In a cheap-money market rollover equity was a loyalty device, a way to keep a founder invested in the platform he just joined. At a 4% policy rate it becomes the mechanism by which a published multiple stays flat while the cash a seller actually receives falls, and the pricing risk the buyer used to carry on its own balance sheet moves to the seller's.

Gray is candid that the bid may simply absorb the shock. Capital, he said, has chased wealth-management assets hard enough that pricing and terms have moved toward sellers for two or three years running, and he allows that "it could still be that there's not much impact in this space," before adding that his gut says otherwise. The capacity behind those terms looks unlikely to be rate-immune: a large share of it is likely financed, whether through acquisition debt at the platform level or sponsor capital underwriting to a spread, and buy-side stock is only a cheap currency while the buyer's own multiple holds.

The pressure, as Gray frames it, will not land evenly. Acquirers with permanent capital or operating cash flow can hold a bid that a debt-financed rival has to withdraw, and owners who signed engagement letters against last year's terms may find that the gap between the market they were sold and the letter of intent that arrives is where deals get re-cut. The sellers who feel this first will be the ones whose buyers need the debt market more than they need the deal.

The tailwind the industry has been riding was itself a rate story. DeVoe & Company's 2025 Annual RIA M&A Outlook attributed the reacceleration in transaction momentum in late 2024 to a run of interest rate cuts and stabilizing markets, and found 54% of RIA leaders expecting deal volume to rise over the following 12 months. That reading was taken in a falling-rate regime, and the sentiment it measured belongs to a market that no longer exists now that the Fed has voted 12-0 in the other direction.

Private equity's exit market offers the closest precedent for what a costlier financing environment does to deal calendars: this publication's read of the record $312 billion first half noted deals taking 274 days to close. The comparison is directional rather than precise, because RIA transactions are smaller and already spread payment across years through earnouts, but the pressure runs the same way. The sellers' market has been tilted long enough that a $21 billion RIA's two decades of refusing to sell became a story in its own right, and the buyers who set those terms were pricing off a cost of capital the Fed just retired.

Watch the consideration mix. If the large platform deals announced in 2027 carry a heavier rollover component than those announced in 2025, the rate hike will have repriced RIA dealmaking without moving a single published multiple. Last year's 466 transactions set the record; the number worth tracking now is how much of the next 500 gets paid in cash.