A weekly update on issues important to the Investment Management industry
Over the next two decades, an estimated $68 trillion is expected to transfer from Baby Boomers and Gen X to Millennials and Gen Z in what has been dubbed the “Great Wealth Transfer.” For RIAs and trust companies, this transition presents both opportunities and challenges that directly impact firm valuations. As client demographics evolve, investment management firms must adapt to retain AUM and navigate the valuation implications of this seismic wealth shift.
A frequent question among RIA owners is whether internal buyers, such as employees or partners, pay less for their equity stakes compared to external buyers, and if so, why pursue internal succession? The answer is straightforward: internal buyers typically pay less, sometimes significantly less, due to unique industry dynamics and the structure of internal deals. This post explores the valuation perspectives and practical reasons behind this pricing differential, as well as why internal succession remains a compelling strategy despite lower valuations.
A well-structured succession plan not only enhances the firm’s operational stability and scalability but also increases its attractiveness to potential buyers. Buyers are not merely acquiring existing assets; they are investing in the future growth and continuity of the business. By prioritizing succession planning, RIA owners can better position themselves for a successful exit, ensuring they maximize value and minimize disruption, ultimately leading to a smoother transition for clients and team members alike.
In our latest webinar, Matthew R. Crow, CFA, ASA and Brooks K. Hamner, CFA, ASA guide you through the critical steps of succession planning, ensuring your firm’s legacy thrives while maximizing its value. Whether you’re considering a sale, seeking investment, or transacting with current employees, this session is designed to equip RIA owners, acquirers, and industry advisors with the knowledge to make informed decisions and capitalize on emerging opportunities.
For the investment management industry, succession planning is not just a strategic necessity—it’s an important driver of firm value.
As the wealth management industry evolves, with an estimated 40% of RIA founders approaching retirement age, effective succession planning can mean the difference between a thriving firm and a diminished valuation.
Here’s how RIAs can navigate succession to maximize value in 2025 and beyond.
For this week’s edition of RIA Valuation Insights, we revisit our whitepaper, “Succession Planning for Investment Management Firms.” The updated whitepaper complements next week’s webinar, “Succession Planning for RIAs: Transition with Confidence,” with RIA team leader and CEO of Mercer Capital, Matt Crow and RIA senior team member and Senior Vice President, Brooks Hamner. You can register for the webinar in the post.
Sometimes we come across an idea that is so good we’re jealous of the person or persons who developed it. The Owner Strategy Triangle is one such idea. Josh Baron and Rob Lachenauer are family business consultants who founded Banyan Global and saw a strategic need for family business owners to decide what they valued most between three options: liquidity, growth, and control. While the authors developed the Owner Strategy Triangle as a way to examine strategy for family businesses, we see useful applications for their framework for RIA leadership as well.
Succession planning is often misunderstood as a one-time event—a moment when an RIA owner transitions leadership and exits the firm. In reality, succession is best viewed as a process, not a single event. It is a strategic, ongoing effort that requires continuous planning and preparation over many years. For RIA owners, the stakes are high: a well-executed succession plan not only ensures the firm’s longevity but also enhances its value, whether you ultimately transition internally or sell to an external party.
In this week’s post, we address the process of succession and the role of internal resources such as next-generation leadership, as well as how investing in these areas increases your firm’s value—regardless of whether you choose an internal or external transition.
In this week’s post, we take a closer look at how market volatility impacts the valuation of RIAs. Specifically, we show an illustrative example of how it could affect the formula pricing valuation of a $1 billion AUM RIA that has 70% of its clients’ assets in the S&P 500 and 30% in a diversified bond fund. However, for RIAs looking to weather a bear market, we recommend focusing on what you can control, as it should pay off in the long run.
Following a comparatively placid first quarter, this month hasn’t been kind to anyone working in investment management. Readers of this blog may be wondering what impact current market conditions have on the value of their firms. Specifically, given the current macro environment, is the value of your RIA impaired? The answer probably depends on who you ask and, more importantly, why you’re asking.
