Corporate Valuation, Investment Management

April 20, 2021

Strong Gains in the Wealth Management Industry Propel RIA Aggregators to New Highs

Oh What a Difference a Year Makes…

Nearly all sectors of the stock market are up over the last year, but that’s especially true for the RIA industry.  Even if most wealth management firms don’t employ any debt in their capital structure, their performance is very much levered to the stock market due to its direct effect on AUM balances, and the operating leverage inherent in the wealth management model.  RIA aggregators are even more levered to market conditions, since they typically borrow money to purchase wealth management firms.  It shouldn’t be too surprising that our aggregator index is up 140% over the last year.

After a rough Q1 in 2020, wealth management firms have fared particularly well over the last year, with favorable market conditions and rising demand for financial advisory services.  During times of excessive volatility and market turmoil, individual investors rely on their advisors to stay the course and rebalance portfolios in accordance with their investment objectives.  Wealth management firms have capitalized on this reliance as the number of advisors charging financial planning fees on top of asset-based fees or commissions increased 72% in 2020. Despite steady gains over the last year, wealth management firms still face challenges pertaining to fee pressure, succession planning and connecting with millennials who are more interested in robo-advisors and fintech products than being counseled by their parents’ advisor.  Additionally, the switch from in-person meetings to digital communication is viewed by many as another obstacle.  According to a recent Schwab study, 35% of advisors viewed clients’ ability to connect virtually as one of the biggest challenges to their business in 2020.  On the flip side, 37% of advisors view leveraging technology infrastructure to be able to seamlessly work remotely as one of the biggest opportunities to their business.
Source: Schwab Advisor Services’ 2020 Independent Advisor Outlook Study

Another near-term opportunity is the pending reversal of some or all of the Tax Cuts and Jobs Act of 2017, and the implications it has for estate planning in 2021.  Biden’s current proposal cuts the Unified Tax Credit (the exemption on gift and estate taxes) in half from $23.2 million to $11.6 million for married couples and from $11.6 million to $5.8 million per individual.  As a consequence, many high net worth families will have significant gift and estate planning needs from their advisors to avoid a substantial increase in their embedded estate tax liability next year.

On balance, 2021 should prove to be another challenging but favorable year for wealth management firms that focus on their clients’ needs and take advantage of rising demand for financial planning services.  Industry headwinds remain, but we’re confident that the industry will prosper, diversify, and expand.

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Mercer Capital to Sponsor The Florida Bar’s 44th Annual Attorney/Trust Officer Liaison Conference
Mercer Capital to Sponsor The Florida Bar’s 44th Annual Attorney/Trust Officer Liaison Conference
Mercer Capital is pleased to sponsor The Florida Bar’s 44th Annual Attorney/Trust Officer Liaison Conference, taking place July 30 to August 1, 2026, at The Breakers in Palm Beach. Matthew R. Crow, CFA, ASA, and Thomas C. Insalaco, CFA, ASA, will represent the firm at the conference.Presented by The Real Property, Probate and Trust Law Section of The Florida Bar, the annual conference brings together attorneys, trust officers, and other professionals for focused education on current trust and estate issues. The 2026 program includes sessions on trustee discharge, fiduciary accounting, undue influence, legislative updates, technology and financial exploitation, and trust and estate case law.Matt Crow is the CEO of Mercer Capital and leads the firm’s Investment Management Industry team. He works with RIAs, independent trust companies, broker-dealers, and investment consulting firms on valuation matters related to corporate planning and reorganization, transactions, employee stock ownership plans, tax issues, and valuations of intangible assets, options, and assets subject to contractual restrictions. He is a regular contributor to Mercer Capital’s RIA Valuation Insights Blog.Tom Insalaco is a Senior Vice President and a member of Mercer Capital’s Gift, Estate, and Income Tax Planning and Compliance practice group. Since 2008, he has provided valuation services across a broad range of industries and matters, including gift and estate tax, business succession and exit planning, and buy-sell agreements.Mercer Capital works with owners, fiduciaries, and professional advisors on valuation and advisory matters involving trusts, estates, tax planning, and disputes. The firm is pleased to support programs that help professionals navigate the financial issues that arise in complex estate and trust matters.Mercer Capital looks forward to connecting with attendees in Palm Beach and participating in this year’s conference. Visit the conference’s website to learn more: https://member.floridabar.org/s/lt-event?id=a1RWQ00000RcEFJ2A3.
Organic Growth Is Becoming the RIA Valuation Differentiator
Organic Growth Is Becoming the RIA Valuation Differentiator
Organic growth is becoming a critical valuation differentiator for RIAs as buyers look beyond market-driven AUM gains to assess whether growth is repeatable, measurable, and transferable. Firms with diversified business development channels and documented processes may be better positioned to support credible forecasts and defend premium valuations.
Independent Trust Companies Benefit from Durable Industry Tailwinds
Independent Trust Companies Benefit from Durable Industry Tailwinds
Independent trust companies continue to benefit from expanding wealth, intergenerational transfers, recurring fiduciary revenue, and growing demand for sophisticated advisory services. Strategic investments and broad transaction interest further demonstrate the industry’s long-term growth potential.

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