RIA Valuation Insights

A weekly update on issues important to the Investment Management industry


Industry Trends

What Can We Make of All This Turnover in the RIA Space?

Some Thoughts on How RIA Principals Can Minimize or Even Capitalize on the Chaos

You’re not the only one dealing with turnover. The pandemic spawned the Great Resignation, and rising inflation means there’s probably a better salary (or signing bonus) out there for anyone that’s looking. The ensuing talent war has created more industry turnover than the end of broker protocol in 2017, and RIA principals are having to invest more time and resources into recruitment and retention than ever before.

“Chaos isn’t a pit. Chaos is a ladder.” This phrase comes to mind as we discuss ways for smaller RIAs to capitalize on this chaos in this week’s post.

What Happens to RIA EBITDA Multiples When Interest Rates Rise?

2021 may be remembered as both the busiest M&A year in history for the investment management industry, as well as the year in which valuation multiples in the space peaked. Transaction volume surged last year and carried into the first quarter, as deals negotiated during a period of cheap money, strong multiples, and the threat of changes in tax law drew both buyers and sellers to the negotiating table. It’s time to question what impact the change in market conditions has for the investment management space.

Wealth Management

RIA M&A Q1 2022 Transaction Update

RIA M&A activity continued to trend upward through the first quarter of 2022 even as potential macro headwinds for the industry emerged. In this week’s post, we take a look at deal activity in Q1 2022 and discuss what the current M&A market means for your RIA.

Wealth Management

Wealth Management Trend Lines May Be Rolling Over

After a Great Year, Higher Rates and Weaker Markets Threaten Continued Growth

By the spring of 2022, many of the industry trends facing and favoring wealth managers started to shift, threatening margins and valuations. Higher interest rates are undermining valuations in both debt and equity markets, taking an unusually strong toll on everything from U.S. treasuries to tech stocks. This shift creates a downward gravitational pull on assets under management, and therefore revenue, for wealth management firms. At the same time, inflationary forces are pushing up on both labor and non-labor expenses for RIAs. The consequence could be challenging for margins in 2022 and could deflate some of the positive influences on profitability that have provided a tailwind to RIA valuations for several years. Read more in this week’s post.

Does RIA Consolidation Work?

Show Me the Money

RIA group-think has been pro-consolidation for the past decade, and increasingly so. You’ve read the headlines about the pace of deals reaching a fever pitch last year and continuing into this year.  We’ve been skeptical of the believed necessity for RIA consolidation in this blog in the past, and have yet to be dissuaded from our position. But opinions are only opinions, and facts are facts. This seems like an opportune moment to check our feelings against reality. How is RIA consolidation performing so far? The verdict from the public markets isn’t very encouraging.  In this week’s post, we look at three publicly traded consolidators of wealth management businesses, Silvercrest, CI Financial, and Focus.

Current Events

Hot Inflation and Cold Markets: RIAs Hit With a New Storm Front

February’s CPI growth came in at 7.9% year-over-year (the highest level in recent memory), and the ongoing Ukraine conflict portends further supply chain challenges that could drive prices even higher.  The front-end of the yield curve has shifted higher as market participants reason that rising inflation will force the Fed to raise rates sooner and by a greater magnitude than had been previously anticipated.

Historically, a flattening yield curve has signaled an end to a growth cycle, and so far in 2022 that certainly seems plausible.  Markets are down and valuation multiples have declined significantly, particularly in high-flying tech stocks. Read this week’s post to find out what this means for the RIA industry.

Asset Management

Do RIA Investors Prefer Growth Over Value?

What Public Company and Transaction Data Multiples May Tell Us About RIA Investor Preferences

This week we look to understand why private market multiples for RIAs have consistently embodied more optimism than that of their publicly traded peers. In doing so, we identify RIA investor preferences unique to the industry, and why such multiples may even be misleading indications of your firm’s value.

Wealth Management

Buy-Sell Agreement Basics for Wealth Managers

The Importance of Buy-Sell Agreements for Wealth Management Firms, and Why It Might Be Time To Revisit Yours

Over the next several weeks, we will be publishing a series of blog posts discussing the importance of buy-sell agreements and other adjacent topics for RIA owners.  Ownership is perhaps the single greatest distraction for advisors looking to grow with their firm, but it can also be an opportunity to align interests and ensure continuity of the firm in a way that is accretive for the firm’s founders, next generation management, and clients. In this week’s post, we emphasize how having a clear and effective buy-sell agreement is imperative to minimizing costly and emotional drama that may ensue in times of planned or unplanned transition.

Current Events

A B2B Fintech in the RIA Space Races to Market

Dynasty IPO Ticks a Lot of Boxes, and Begs a Few Questions

Last week we were surprised by a rare sighting, an S-1 filed by a prominent player in the RIA community. Dynasty Financial Partners seeks to raise $100 million in a public offering. The mercifully terse prospectus is less than 250 pages, and is recommended reading for anyone who swims (or fishes) in this pond.

Asset Management

Asset Management Firms See Strong Performance in 2021

The asset management industry fared well in 2021 against a backdrop of rising markets and improved net inflows. Strong performance in equity markets was a major contributor to this performance. In addition, 2021 saw modest organic growth, although there were significant variances by asset class. In this week’s post, we discuss these issues and present our outlook for the industry.

‘Twas the Blog Before Christmas…

2021 Mercer Capital RIA Holiday Quiz

As year-end approaches, we hope to spread some cheer with our annual RIA Holiday Quiz. There is a chance to win a prize with a perfect score! Don’t forget to supply your contact information so we know who to send the prize to. Merry Christmas!

How Does Your RIA’s Client Base Affect Your Firm’s Value, and What Can You Do To Improve It?

We’re often asked by clients what the range of multiples for RIAs is in the current market. At any given time, the range can be quite wide between the least attractive firms and the most attractive firms. The factors that affect where a firm falls within that range include the firm’s margin, scale, growth rate of new client assets, effective realized fees, personnel, geographic market, firm culture, and client demographics (among others). In this post, we focus on the client demographics factor, explain how buyers view client demographics, and explore steps some firms are taking to reach a broader client base.

In the Market for a Good Used RIA?

8 Tips for Being a Buyer in a Seller’s Market

A couple of times a week, we get calls from someone we’ve never met saying they’d like to talk with us about their RIA acquisition strategy. About half are RIAs or trustcos looking for expansion, and the other half are private equity or family offices. Very few are calling because they have a particular target in mind, fewer still have begun the process of negotiating with a potentially interested seller.

If your acquisition strategy these days is starting from scratch, you’re in a tough spot. There’s nothing on the lot, and what is available looks expensive. That doesn’t mean you should give up, though. In this post we offer some practical tips to pursue an acquisition strategy in this market environment, as well as the markets to follow.

Asset Management Wealth Management

Asset / Wealth Management Stocks See Mixed Performance During Third Quarter

After a Strong Summer, Public Asset Managers See Stock Prices Dip as Market Pulls Back in September

RIA stocks saw mixed performance during the third quarter amidst volatile performance in the broader market. In September, the S&P 500 had its worst month since March 2020, and many publicly traded asset and wealth management stocks followed suit.

In this week’s post, we illustrate what this means for your RIA and give a prediction on the outlook of the RIA industry.

Asset Management Current Events

“Permanent” Capital Providers Offer a Different Type of RIA Investor

Beginning With No End in Mind

The rise of “permanent capital” providers is both in response to and appropriate for the current environment of premium entrance multiples in the RIA space. While making a permanent capital investment doesn’t eliminate the depressive effects of current valuations on returns, it does help to mitigate them.

Absent self-imposed pressure to generate an exit within the foreseeable future, RIA investors can focus on opportunities for sustainable and growing distributions – the real value of investing in investment management.


Not Every RIA Buyer Is a Control Freak

Despite Conventional Wisdom, Some Investors Prefer Minority Positions

The pricing of minority transactions in the RIA space leaves some people scratching their head. Traditional valuation theory holds that investors pay less for minority interests than controlling interests. Reality suggests otherwise.

Consolidation in the RIA Industry

RIAs Are Being Acquired at a Record Pace, But Does That Really Mean the Industry Is Consolidating?

Consolidation is a theme that has a lot of traction in the RIA industry: that a growing multitude of buyers are scrambling to outbid each other for a limited and shrinking number of firms. With the rapid pace of deal activity in the RIA industry, you might expect to see the number of firms decline, as that is typically the norm for consolidating industries. But that’s not been the case in the RIA industry, at least yet. Despite consolidation pressures and record levels of acquisition activity, the reality is that the number of RIAs continues to increase, with formations outpacing consolidation.

Another way to track consolidation is to look at how assets under management are distributed across firms of different sizes, rather than at the number of firms. The industry hasn’t seen significant consolidation by this metric either. So what does all this mean for the industry? This post tackles that question.

To the Moon or Back to Earth?

RIA Valuations Have Increased Substantially Over the Last Year, but That Doesn’t Necessarily Mean These Stocks Are Overpriced

A few weeks ago we blogged about how RIA stock prices have increased over 70% on average over the last year. This rapid ascent begs the question if valuations have gotten too rich with the market run-up during this time. In this post, we answer this question.

Practice Management

Post-Pandemic Tax Planning for RIAs

Is It Time To Consider a Change in Your Corporate Structure, or Your Address?

Dynasty’s move from New York to Florida and UBS’s relocation to Tennessee got plenty of attention. Post-pandemic, we’re starting to hear of smaller RIAs contemplating similar moves. There’s plenty of opportunity, because most investment management firms still call high-cost, high-tax states home.

Current Events

Multiple Expansion Drives 70%+ Returns for RIA Stocks Over Last Year

Over the last year, many publicly traded investment managers have seen their stock prices increase by 70% or more.  This increase is not surprising, given the broader market recovery and rising fee base of most firms.  With AUM for many firms at or near all time highs, trailing twelve month multiples have expanded significantly, reflecting the market’s expectation for higher profitability in the future.  For more insight into what’s driving the increase in stock prices, we’ve decomposed the increase to show the relative impact of the various factors driving returns between March 31, 2020 and March 31, 2021.

Investment Management

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