RIA Valuation Insights

A weekly update on issues important to the Investment Management industry

Margins and Compensation

How Growing RIAs Should Structure Their Income Statement (Part II)

Compensation Conundrums

Personnel costs are by far the largest expense item on an RIA’s P&L, but we’ve found significant variation in how RIA owners think about compensating their employees (and themselves).  This is the second post of a two-part series on compensation best practices for growing investment managers which focuses on how to structure partner compensation. 

Margins and Compensation

How Growing RIAs Should Structure Their Income Statement (Part I)

Compensation Conundrums

Personnel costs are by far the largest expense item on an RIA’s P&L, but we’ve found significant variation in how RIA owners think about compensating their employees (and themselves).  We’ll devote the next two posts to discussing best practices from an outsider’s perspective. This week, we address how to structure employee compensation when you are not ready to bring on an equity partner.

Current Events

The Investment Management Sector Is Being Bombarded … With Money

What Do You Do When Liquidity Matters More Than Fundamentals?

After the initial punditry on whether or not the 2020 market crash/recession and recovery would be “L” shaped, “U” shaped, “V” shaped, or “W” shaped, it has become clear that the recovery is “K” shaped, with higher-skilled and higher paying jobs recovering rapidly, and many lower-skill, lower-paying jobs declining.  What does this mean for RIAs?  Most RIA clients are higher-income professionals who are paying more attention to their investment portfolios in this environment – not less.   Bullish for clients = bullish for the industry.

Current Events Transactions

Gin, Business Valuation, and Ryan Reynolds

Earn-Outs in RIA M&A

Earn-outs are commonly used in RIA deals, and we expect contingent payments to make up an even larger percent of deal consideration for the next few months, quarters, or years depending on how long the current economic uncertainty lasts.  And while we hope most of our clients would be thrilled by the prospect of $335 million in upfront cash payments, we don’t want you to end up feeling as Ryan Reynolds did last week.  In this post, we explain what an earn-out is, why they are commonly used in RIA transactions, and how earn-outs may be used as a saving grace for deal activity in the current economic environment.

COVID-19 Coverage Industry Trends

Financial Advisors, Tell Your Clients to Gift Now!

Lower Asset Values Provide an Opportunity for Tax-Efficient Wealth Transfers Before November’s Election

Last week we covered Joe Biden’s proposed estate tax changes and their impact on family wealth transfers if he gets elected in November.  Proper estate planning can mitigate the adverse effects of higher taxes on wealth transfers, but the window to do so may be closing if we have a regime change later this year.  Further, the demand (and associated cost) for estate planning services may go up significantly in November, so you need to apprise your clients of these potential changes before it’s too late.

COVID-19 Coverage Industry Trends

Estate Tax Planning May Be the Next Surprise for RIA Community

2020 Chicanery Never Ends

2020 has been full of surprises, and the third quarter is bringing more.  The persistence of the pandemic and the consequent economic strain on many has shifted political winds in favor of the minority party.  If these trendlines don’t roll over between now and November 3, we’ll have a new executive and legislative regime and, with it, a redirection of tax policy.  It’s not too early to start thinking about what impact certain legislative changes will have on the RIA industry, especially with regard to estate tax law.

Alternative Assets COVID-19 Coverage

Outlook for Alternative Asset Managers During COVID-19

Despite the global pandemic, the long-term outlook for most alternative asset managers appears healthy due to strong investor interest and emerging opportunities caused by market dislocation. In the near term, however, managers with large exposure to highly affected industries, or those that have seen large asset outflows, are likely to see their valuations decline. Managers with less exposure to highly affected industries and those whose strategies and fundraising are poised to benefit from the current environment are likely to see valuations increase.

COVID-19 Coverage Transactions

Independent RIAs Drive M&A During Downturn

RIA M&A Amid COVID-19 (Part II)

The outlook for RIA M&A at the end of the first quarter was murky. As anticipated, previously announced deals in the final stages of negotiations did close despite COVID-19, but new deal activity slowed some in the second quarter. Interestingly, independent RIAs, rather than consolidators, drove much of this deal activity.

Industry Trends

RIAs Rally After Worst Quarter in Eleven Years

The Industry Is Now in a Bull Market Following March’s Sell-Off

It probably doesn’t feel like it, but most RIA stocks are up over the last year. Over this time, we’ve had two bull markets and one bear market in one of the most volatile twelve-month periods. Against this backdrop, we discuss recent market performance, implications for your RIA, and a potentially improving outlook.

Investment Management

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