The intricate journey of selling a business you’ve built can be daunting, filled with complex emotions and countless considerations. This process, particularly in the investment management space, requires thorough preparation, strategic thinking, and an understanding of the many dynamics involved. In this post, we explore four critical areas that every investment manager must consider: developing a pragmatic pricing expectation, establishing a solid rationale for selling, preparing your firm’s financial documents, and understanding the tax implications of different deal structures.
CI Financial’s pivot from a planned IPO to the sale of a 20% convertible preferred stake of its US wealth management division to a consortium of institutional investors is not only a significant move for CI Financial but also sends ripples through the wealth management industry. In this post, we explore the details of this transaction, the potential consequences for CI Financial, and the broader implications for the wealth management industry.
The secret of selling your RIA for peak pricing lies in the terms, but it’s not as straightforward as it may seem. Investment management transactions these days involve creative deal terms, risk-sharing and evolving market conditions that keep the market bustling, despite a host of economic challenges. From managing buyer-seller relationships to balancing risk and reward, we explore how industry players are adapting to maintain the appearance of peak pricing, while carefully guarding against market downturns. Find out how the art of the deal is being redefined and learn how to navigate the market to achieve your transaction goals.
The endowment effect has an impact on your RIA and oftentimes rules of thumb and recent headlines can lead to overvaluation. We share the nuances of valuing your firm, from assessing cash flow, growth, and risk to understanding the relevance of non-systematic risks. Uncover the factors that truly influence your RIA’s value and learn how an independent valuation can help you make informed decisions for your firm’s future.
Curious about what makes a firm’s margin a powerful indicator of its performance? We explain the “typical margin” for RIAs and how different segments of the investment management industry have varying margins based on their business models. Learn why future margin prospects are more significant than the current margin when evaluating the worth of an RIA and how to protect margins in a rapidly changing industry, and how to generate stable, improving margins that lead to higher valuation multiples when the firm is eventually sold.
2022 was a tough year for the RIA industry and the stock market, as persistent inflation, rising interest rates, and geopolitical tensions shook the economy. Asset management firms felt the pressure, but what factors drove this decline and how did it impact the industry? Discover the challenges faced by both active and passive funds, and explore the outlook for asset managers in the face of an uncertain future.
RIA M&A activity has remained resilient through the first quarter of 2023, even as macro headwinds have emerged for the industry over the past year. Fidelity’s March 2023 Wealth Management M&A Transaction Report listed 68 deals through March 2023, up 19% from the 57 deals executed during the same period in 2022. These transactions represented $108.3 billion in AUM—a 21% increase from the first quarter of 2022.
RIAs started the quarter strong, but bank failures and interest rate hikes led to underperformance. Alternative asset managers, however, saw a last-minute rally during the final few days of the quarter, leading to this category outperforming the S&P during the period.
Harry Truman kept a sign with his personal slogan, “The Buck Stops Here,” on his desk. The reverse side of his sign, which faced the President, says, “I’m from Missouri.” Specifically, Truman grew up in Independence, Missouri, and took pride in his hometown. RIAs would be well advised to value their independence as much.
Succession planning has been an area of increasing focus in the investment management industry, particularly given what many are calling a looming succession crisis. The demographics suggest that increased attention to succession planning is well warranted: over 60% of RIAs are still led by their founders, and only about a quarter of them have non-founding shareholders. Yet when RIA principals are asked to rank their firm’s top priorities, developing a succession plan is often ranked last.