RIA Valuation Insights

A weekly update on issues important to the Investment Management industry


Practice Management

Why Scale Doesn’t Always Resolve Succession Issues

Recent challenges at Och-Ziff and Hightower highlight the struggles RIAs face in transitioning the business to the next generation of management.  Size doesn’t alleviate this problem and may actually exacerbate it for some asset managers.  In this week’s post, we explore what went wrong in these instances and what you can do to avoid a similar fate.do to avoid a similar fate.

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.

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.

Current Events

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.

Current Events

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.”


Valuing an Offer for Your RIA

The Devil’s in the Details

In this final blogpost on evaluating unsolicited offers for your RIA, we take on this issue of valuing an offer.  Valuing the offer for your RIA can be more difficult than valuing the firm itself.


Coping With Deal Fatigue?

Keep Your Eyes on the Prize

If you’re entering into negotiations to sell your RIA, buckle up, stay composed, be mindful of your goals, and don’t catch deal fatigue.


Unsolicited Offers for Your RIA

Is the First Bid the Best?

The primary danger of an unsolicited offer is that it lures potential sellers into thinking the deal is done and the process will be easy.  As with most things in life, if something looks too good to be true, it usually is.


What Is My RIA Worth?

Of all the topics we cover in RIA Valuation Insights, the most popular concerns what an investment management firm is actually worth.  As a consequence, we thought it would be worthwhile to offer a webinar on the topic, and are planning to do so on Tuesday, October 3. 


An Example of Structuring Earn-outs for RIAs

If you’re considering an offer for your firm that includes earn-out consideration, think about having some independent analysis done on the offer to see what it might ultimately be worth to you. If you’re working the buy-side, prepare to spend lots of time fine-tuning the earn-out agreement—you won’t get credit if things go well for the seller, but you will get blamed if it doesn’t.

Can Planning for Succession Give Your Investment Management Firm an Unfair Advantage?

One refrain we often hear from clients is how different they are from other investment management firms. We agree. Asset managers have a lot in common, but we see a huge variety of personalities, investment approaches, business plans, marketing activities, compensation models, etc. In short, every firm has a unique culture, just like families.

Do Your Clients Give You an Unfair Advantage?

A question that we don’t hear enough RIAs asking themselves: what makes our best customer? The conventional wisdom we’ve gathered from talking with a wide variety of investment management firms over the years is that high net worth relationships make the best clients for RIAs. Relationships with individuals are supposed to be stickier than, say, institutional relationships where investment committees drop managers the moment their three-year performance lags the index. However, is it that simple?

Building Value in Your Investment Management Firm

The Unfair Advantage

After years of working with investment management firms of all shapes and sizes, it is our opinion that building the most value in an RIA comes down to the same thing: developing and capitalizing on some unfair advantage. That may sound unnecessarily mysterious or metaphorical, but it really boils down to examining the basic building blocks of firm architecture and finding out where your firm can excel like none other.

RIA Performance Metrics: Keep an Eye on Your Dashboard

A persistent truth about investment management is that no analyst ever saw a piece of information he or she didn’t want. Professional investors are, by their very nature, research hounds – digging deep into a prospective investment’s operating model, financials, competitive landscape, management biographies, and whatever else might be relevant to try to evaluate the relative merit of buying into one idea instead of another. This same diligence doesn’t always extend to practice management, though, and we are not infrequently surprised at how little attention management teams at RIAs devote to studying their own companies.

An All-Terrain Clause for your RIA’s Buy-Sell Agreement

Clients writing new buy-sell agreements or re-writing existing ones frequently ask us how often they should have their RIA valued. Like most things in life, it depends. We usually recommend having a firm valued annually, and most of our clients usually do just that. “Usually,” though, is subject to many specific considerations.

RIA Matchmaking

Hardly a week goes by that we don’t get asked what we think are optimal qualities of an RIA merger partner. Answering that always feels a little like giving dating advice: different partners suit different partners. No one disputes that the industry is ripe for consolidation, but there’s no easy way to “swipe-right” on a target company’s ADV, and it’s pretty unlikely that sec.gov is going to have its own version of Tinder anytime soon. Nevertheless, in honor of today’s holiday, here are a few thoughts on what to think about when considering a merger partner.

Investment Management

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