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RIA Valuation Insights

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July 23, 2018 Wealth Management

Wealth Management Industry: Opportunities Abound Despite Headwinds

Wealth management firms have fared well in recent years on the back of rising markets, but the underlying drivers suggest an industry in flux; global investible assets are at all time highs, intergenerational wealth transfer is accelerating, and FinTech products are poised to disrupt.  Yet, many analysts are skeptical about the industry’s prospects.  Rising global wealth means that there are more assets for wealth managers to manage, and intergenerational wealth transfer means that there are also more opportunities to gain (and lose) clients.  FinTech products threaten competition, but also offer efficiencies for agile firms.  Depending on your point of view, the industry is either poised to grow or on the verge of massive disruption.

July 16, 2018 Industry Trends Transactions

Asset Manager M&A Activity Continues to Accelerate in 2018

Asset manager M&A was robust through the first two quarters of 2018 against a backdrop of volatile market conditions. Several trends which have driven the uptick in sector M&A have continued into 2018, including revenue and cost pressures, RIA aggregators, and an increasing interest from bank acquirers. We discuss further in this week’s post.

July 9, 2018 Industry Trends

RIA Stocks Post Mixed Performance During 2Q18

Over the last several years, asset managers have benefited from global increases in financial wealth driven by a bull market in asset prices.  However, favorable trends in asset prices have masked some of the headwinds the industry faces. Against this backdrop, we take a closer look at last quarter’s market performance through the lens of sector and size.

July 2, 2018 Current Events

What We’re Reading About RIA M&A and the SEC Advice Rule

Most of the sector’s recent press has focused on M&A trends and the SEC’s proposed advice rule, so we’ve highlighted some of the more salient pieces on these topics and a few others that are making news in the industry.

June 25, 2018 Practice Management

Thinking About Going Exclusive?

Five Considerations for RIA/BD Hybrids Looking to Drop Their BD Status

With the Advisor Rule looming and commissions dwindling, it may be time for some RIA/BD hybrids to take it to the next level: drop the broker-dealer license and register exclusively with the SEC as an investment advisor.  This week’s post focuses on what’s driving the downward trend in BD-only registrants and when it makes sense to abandon the hybrid model.

June 19, 2018 Practice Management

Five Things RIA Owners Can Do to Turn Success into Momentum

While the fundamentals of your firm may appear to deteriorate during bear markets, the fundamentals of the industry will continue to drive success for a long time. Today, the fundamentals of your firm are probably the best they’ve ever been. That’s why this is the perfect time to consider your formula for success, prepare for the next downturn, and build the competitive momentum you’ll need to ride the industry trends to greater success in the future.

June 11, 2018 Current Events

What Focus Financial’s IPO Filings Tell Us About the RIA Industry

Last week we offered up some observations on Focus Financial’s S-1, and as we continue to study the filings, it occurred to me that they say as much about the current state of the RIA industry as to they do about Focus itself.

June 4, 2018 Current Events

Summer Reading for the RIA Community

Focus Financial’s IPO Filings

Money, being what it is, never sleeps.  It also never goes on vacation.  I was, however, about to spend ten days away from the office with my older daughter in Scotland and England when Focus Financial (finally) filed for a public offering.  One of the most anticipated events in the wealth management industry, the pendency of the Focus IPO didn’t cancel my trip, but I knew that my vacation was going to be at least punctuated by reading the S-1 along with my peers’ commentaries.  I’ve now read the 275-page document a few times, and while it’s not your typical beach novel, the Focus prospectus is required summer reading for anyone in the RIA community.

May 29, 2018 Current Events

Out with the Old and In with the New

Advice Rule Likely Successor to Recently Vacated Fiduciary Rule

Recent judicial decisions have all but nullified the DOL’s proposed regulation, and the SEC’s Advice Rule appears poised to be the likely successor.  This post explores the recent turns in this ongoing saga and what it might mean for your firm.

May 21, 2018 Current Events

1Q18 Call Reports

As we do every quarter, we take a look at some of the earnings commentary of pacesetters in asset management to gain further insight into the challenges and opportunities developing in the industry. This quarter the conversations center around market volatility, regulatory developments, and the potential cash flow into fixed income products.

May 14, 2018 Industry Trends

What’s the Latest on Broker Protocol?

It’s been several months since Morgan Stanley and UBS departed from the Protocol for Broker Recruiting, and the industry is continuing to feel the ripple effects of their maneuver.  Much remains to be seen, but many analysts expect more firms to abandon the protocol despite Wells Fargo’s and Merrill Lynch’s recent announcements to stick with it for now. 

May 4, 2018 Current Events

What We’re Reading about the SEC Advice Rule, Fiduciary Rule, and Broker Protocol

Most of the sector’s recent press has focused on the SEC’s proposed advice rule. We’ve highlighted some of the more salient pieces on the proposed rule, as well as articles on a few other topics that have been making news in the industry.

April 30, 2018 Transactions

Purchase Accounting Considerations for Banks Acquiring Asset Managers

As banks of all sizes seek new ways to differentiate themselves in a competitive market, we see many banks contemplating the acquisition of an existing asset management firm as a way to expand and diversify the range of services they can offer to clients. Transaction structures between banks and asset managers can be complicated, often including deal term nuances and clauses that have significant impact on fair value. Asset management firms are unique entities with value attributed to a number of different metrics (assets under management, management fee revenue, realized fee margin, etc.). It is important to understand how the characteristics of the asset management industry, in general, and those attributable to a specific firm, influence the values of the assets acquired in these transactions.

April 20, 2018 Industry Trends

RIA Stocks off to a Rough Start in 2018

A rocky first quarter was particularly volatile for publicly traded RIAs.  After reaching record highs in late January, most categories of publicly traded RIAs ended the quarter with negative returns.

April 13, 2018 Industry Trends Transactions

Asset Manager M&A Activity Accelerates in 2018

Asset manager M&A was robust through the first quarter of 2018 against a backdrop of volatile market conditions.  Several trends which have driven the uptick in sector M&A have continued into 2018, including revenue and cost pressures and an increasing interest from bank acquirers. We discuss further in this week’s post.

April 6, 2018 Industry Trends

Volatile First Quarter Brings Asset Management Industry Headwinds Back Into Focus

Publicly traded asset managers had a rough first quarter, as volatility returned to the market and major indices posted negative quarterly returns for the first time in over two years.  While the overall drop in the market was relatively modest, stock price declines of publicly traded asset managers were generally more significant. It is not surprising that most asset managers have underperformed during periods of declining markets, since the reverse was true during 2017, when most asset managers outperformed the major indices.

April 2, 2018 Industry Trends

Three Takeaways from the CFA Institute’s Wealth Management Conference in Los Angeles

Several topics were discussed at the CFA Institute’s Wealth Management Conference, most of which centered around financial planning, practice management, and servicing private clients with evolving needs and return requirements.  Though we weren’t able to attend all the sessions, we did pick up on a few themes from our discussions with the attendees and other exhibitors. In this week’s post, we further discuss those themes.

March 26, 2018 Current Events

The Impact of the 2017 Tax Cuts & Jobs Act on the Investment Management Industry

This whitepaper is a compilation of thoughts we have gathered in the early days of this new tax regime. We present what we think are the major issues that RIA partners should consider.

March 18, 2018 Current Events Transactions

Two Perspectives on RIA Transactions in the Wake of the Tax Bill

There is an argument to be made that the 2017 Tax Cut and Jobs Act is bullish for RIA M&A, but there is also a counter-argument. In this week’s post, we address both.

March 9, 2018 Current Events

Your RIA May Qualify for the QBI Deduction, But Don’t Get Your Hopes Up

The Tax Cuts and Jobs Act (TCJA) introduces the Qualified Business Income (QBI) deduction as a partial offset to the bill’s reduction in the relative tax efficiency of pass through entities (S corporations, limited liability companies, and partnerships) versus C corporations.  Still, many RIAs will not be eligible for the deduction, and those that do will have a lot to keep in mind as it pertains to reasonable compensation levels and investment income.  We’ll try to sort it all out for you in this week’s post.

March 2, 2018 Current Events Industry Trends

What We’re Reading about the Tax Bill

Most of the sector’s recent press has focused on the tax bill’s impact on RIAs, so in addition to our own writings on the matter, we’ve highlighted some of the more salient pieces we’ve come across regarding the tax bill as it relates to the asset management sector.

February 23, 2018 Current Events Practice Management

The Tax Bill Rendered Your Shareholder Agreement Obsolete

The Tax Cuts and Jobs Act has really shaken up the underlying economics of investment management firms and, with that, the value of those firms. As a consequence, many owners of RIAs have inaccurate ideas of what their firms are worth, and, worse than that, they have outmoded shareholder agreements suggesting the willingness to transact at inaccurate valuations.

February 16, 2018 Current Events

Q4 Call Reports

Triadic Effects of the New Tax Law

The Tax Cuts and Jobs Act has been especially beneficial to the RIA sector, as lower corporate tax rates has had a positive impact on equity markets, boosting AUM and earnings, which are now taxed at lower rates.  Many firms are still assessing the full impact of tax reform, but what is clear is that lower corporate tax rates in 2018 will give asset mangers increased flexibility in capital management, M&A activity, and technology investment.  As we do every quarter, we take a look at some of the earnings commentary of pacesetters in asset management to gain further insight into the challenges and opportunities developing in the industry.

February 12, 2018 Current Events Practice Management

What RIA Owners Need to Know About the New Tax Law

For this week’s post, we’re offering the slides and recording from our recent webinar on the tax bill’s impact on the investment management community.  On balance, we believe most RIAs are better off as a consequence of the legislation, but there are nuances to the “win.”