RIA M&A Activity Continues to Reach Record Highs
Despite the dip in the second quarter of 2021, RIA M&A activity continues to reach record highs putting the sector on track for its ninth consecutive year of record annual deal volume.
As we discussed last quarter, the same three demand drivers were persistent throughout the third quarter. While fee pressure in the asset management space and a lack of succession planning by many wealth managers continues to drive consolidation, looming proposals to increase the capital gains tax rate has accelerated some M&A activity in the short-term as sellers seek to realize gains at current rates.
Increased funding availability in the space has further propelled deal activity as acquisitions by consolidators and direct private equity investments increased significantly as a percentage of total deals during the recent quarter. What does this mean for your RIA firm? Read this post to find out.
After a Strong Summer, Public Asset Managers See Stock Prices Dip as Market Pulls Back in September
RIA stocks saw mixed performance during the third quarter amidst volatile performance in the broader market. In September, the S&P 500 had its worst month since March 2020, and many publicly traded asset and wealth management stocks followed suit.
In this week’s post, we illustrate what this means for your RIA and give a prediction on the outlook of the RIA industry.
Beginning With No End in Mind
The rise of “permanent capital” providers is both in response to and appropriate for the current environment of premium entrance multiples in the RIA space. While making a permanent capital investment doesn’t eliminate the depressive effects of current valuations on returns, it does help to mitigate them.
Absent self-imposed pressure to generate an exit within the foreseeable future, RIA investors can focus on opportunities for sustainable and growing distributions – the real value of investing in investment management.
After a year off, ATO held its annual meeting at the Ritz-Carlton in Amelia Island, Florida to discuss industry trends, practice management, transaction activity, and the current competitive landscape.
In this week’s post, we discuss our main takeaways from the meeting.
Considerations for Every RIA Owner
Selling the business you built from the ground up is a bittersweet experience. Many business owners focus their efforts on growing their business and push planning for their eventual exit aside until it can’t be ignored any longer. While this delay may only prove mildly detrimental to deal proceeds in other industries, in the investment management space, there are very few buyers who will be interested in YOUR business without YOU (at least for a little while).
Long before your eventual exit, you should begin planning for the day you will leave the business you built. There are many considerations for investment managers contemplating a sale, in this post we suggest four ways that you should start.
Valuation gaps are frequently encountered in RIA transactions. Buyers and sellers naturally have different perspectives that lead to different opinions on value. These different perspectives, unsurprisingly, lead to different opinions on value, and the gap can be substantial. Bridging that gap is key to getting a deal done. In this week’s post, we address four ways that buyers and sellers can bridge a valuation gap.
Despite Conventional Wisdom, Some Investors Prefer Minority Positions
The pricing of minority transactions in the RIA space leaves some people scratching their head. Traditional valuation theory holds that investors pay less for minority interests than controlling interests. Reality suggests otherwise.
Is the RIA Industry in Growth Mode or Shake-Out?
While the wealth management industry is not new, the amount of change, churn, and growth that has occurred in the industry over the past ten years make it easy to forget how far the RIA industry has come since the heyday of broker-dealers. Contextualizing the challenges facing the wealth management industry leaves one to wonder if many of these trends are no more than growing pains in the sector’s life cycle. And if so, what might such analysis suggest about the prospects for the fiduciary model?
Even in One of Hottest M&A Markets in Recent History, Most RIA Principals Still Do Not Plan to Sell Their Business in the Next Three Years.
Did you know 67% of RIA principals plan to sell, merge, or conduct a transaction through which they will leave the business in the next 5 years? Yet, only 36% have either a signed ownership agreement or strategy in place? There are some explanations to this disconnect that we discuss in this post. Because succession planning is so important, we conclude by discussing how to ensure a successful succession.
The Value of Future Fiduciary Appointments
Independent trust companies are frequently named in wills to serve as the trustee of an estate or living trust. These appointments may create a revenue opportunity for an independent trust company next year or fifty years from now. A trust company is sometimes notified of their assignment but isn’t always. Future fiduciary appointments certainly have some value; but how much and how do you measure it?