RIA Valuation Insights

A weekly update on issues important to the Investment Management industry


COVID-19 Coverage


Independent RIAs Drive M&A During Downturn

RIA M&A Amid COVID-19 (Part II)

The outlook for RIA M&A at the end of the first quarter was murky. As anticipated, previously announced deals in the final stages of negotiations did close despite COVID-19, but new deal activity slowed some in the second quarter. Interestingly, independent RIAs, rather than consolidators, drove much of this deal activity.

FULL Disclosure: The SBA Outs the Investment Management Industry’s Participation in the PPP

We spent some quality time with the SBA’s release of PPP borrower data to see what impact the program has had on the investment management industry. After scrubbing out some misclassified businesses, we found more than 2,400 program participants (RIAs, trust companies, financial planning firms, etc.) that borrowed at least $150,000 (a separate release covered smaller loans). Even though the borrower pool is relatively small (there are at least 10,000 RIAs that aren’t participating), the demographics of the pool are telling.

Practice Management Wealth Management

Pandemic Practice Management Opportunities

RIAs are Taking Advantage of this Time to Revisit Shareholder Agreements

You’ll probably find that the “downtime” afforded by working remotely and traveling less is a perfect time to clean up some practice management issues, including your buy-sell agreement. So pull your shareholder agreement out and compare it to our whitepaper.

So You Got a PPP Loan, Now What?

In order to mitigate the potential impact of the COVID-19 crisis, many RIAs applied for and received loans under the Paycheck Protection Program (PPP) established by the CARES Act. Now that the loans have been received and disclosure is strongly advised (if not mandated), many RIA owners are wondering what signaling effect the loans will have on clients. Will clients view PPP loans as a sign their advisor is experiencing financial strain or on the verge of financial insolvency? Or will clients view it as a precautionary measure rather than a last-ditch effort to stay afloat financially?

Industry Trends

Why Are Small Cap RIAs Down 40% Over the Last Year?

Most Investment Managers Remain in Bear Market Territory Even as the Broader Market Recovers

Believe it or not, the S&P 500 is exactly where it was a year ago.  It’s been a wild ride, but most diversified investors probably haven’t done as bad as they think during this time.  Unfortunately, that’s not the case for the RIA industry, which is still reeling from the Coronavirus pandemic and numerous other industry-specific headwinds.  Such a divergence is unusual for an industry tied to market conditions, so this week we analyze the driving forces behind this disparity.

Call Reports

Are Public RIA Dividend Yields a Mirage?

Investors Quarantine Their Positions Despite the Search for Income, Strong Fundamentals

Since the Coronavirus pandemic settled into the American consciousness in mid-March, industry pundits have been actively musing about the impact of the crisis on the RIA community.  RIA operations are mostly unaffected by this pandemic, and RIA financial performance has been supported by massive central bank intervention.  None of this explains the pricing of publicly traded RIAs, however; especially when you look at the impact that slumping valuations have had on RIA dividend yields.

Asset Management

Outlook for Asset Management Firms Amid COVID-19

Falling Asset Prices Threaten Profitability as Spotlight Turns to Relative Performance

Active managers have generally underperformed their benchmarks over the past 10 years, which has driven outflows into low-fee passive products. The extreme financial market volatility and dispersion over the last two months has created major price dislocation and the potential to generate outperformance. The current environment may well be the time for active managers to prove themselves by protecting clients’ assets relative to index performance and justifying their fees.

Industry Trends

RIAs Suffer Worst Quarter Since the Financial Crisis

Most RIA Stocks are Now in Bear Market Territory

Last quarter we blogged about how great 2019 was for the RIA industry.  Recent events have rendered that blog post largely irrelevant, as discussions in the industry are now centered on how the COVID-19 global pandemic has impaired RIA valuations. This post summarizes the effect it has likely had on RIA valuations.

Current Events Industry Trends

Don’t Waste This Crisis

Tune Your Business Model for Greater Resiliency

The value of RIAs and the future of transactions in the industry ultimately comes down to the health of the individual firms. Fortunately, there is a relatively straightforward way to assess the financial well-being of your firm, and ways of taking corrective action if your firm’s future is threatened.

Current Events Industry Trends

Where Are RIA Valuations Today?

Matt Crow's Podcast Interview with Mindy Diamond

This is our first blogpost in three weeks. As the Coronavirus pandemic set in across the United States, Mercer Capital adjusted to working remotely about as smoothly as I could have hoped. The RIA team here at Mercer Capital struggled to find appropriate topics to cover in our weekly blog. Regular “business as usual” topics seemed out of place, and writing about very current events, like the massive dislocations in the structure of markets, isn’t why our readers spend their precious minutes absorbing our blog. For a couple of weeks, it seemed better to say nothing than to say the wrong thing. Fortunately, Mindy Diamond of the financial advisory recruiting firm, Diamond Consulting, asked if I would help her with a podcast about the impact of the pandemic on RIA valuations and, consequently, on transaction activity.

If you don’t subscribe to the Diamond podcast, Mindy hosts the all-stars of the RIA universe like Shirl Penney, David Canter, Mark Tibergien, and Liz Nesvold. Mindy also throws in a few mere mortals such as myself for variety – and digs until she gets well past the talking points. I hope you enjoy listening to this as much as I enjoyed the interview.

Investment Management

Mercer Capital provides RIAs, trust companies, and investment consultants with corporate valuation, litigation support, transaction advisory, and related services