RIA Valuation Insights

A weekly update on issues important to the Asset Management industry

Wealth Management

Whitepaper Release: How to Value a Wealth Management Firm

Investment management is a younger profession than many, but it too has evolved and is evolving, into an industry of sub-specialties of manufacturing (asset management) and distribution (wealth management).  Wealth management is in a dynamic period, with changing client service models, challenges to profitability, the augmentation and distraction of technology, consolidation in some ways and fragmentation in others.

Recognizing this, we thought it would be useful to put together a whitepaper on valuation issues that are unique to the wealth management industry.  While there are certainly characteristics of wealth management firms that are common to all RIAs, there are enough distinctions to caution anyone from painting the profession with too broad a brush.

Wealth Management

What Wealth Managers Need to Know About the Market Approach

The market approach is a general way of determining the value of a business which utilizes observed market multiples applied to the subject company’s performance metrics to determine an indication of value.  The “market” in market approach can refer to either public or private markets, and in some cases the market for the subject company’s own stock if there have been prior arms’ length transactions.  The idea behind the market approach is simple: similar assets should trade at similar multiples (the caveat being that determining what is similar is often not so simple).  The market approach is often informative when determining the value of a wealth management firm.

Wealth Management

What Wealth Managers Need to Know About the Income Approach

There are three general approaches to determining the value of a business: the asset-based approach, the income approach, and the market approach.  The three approaches refer to different bases upon which value may be measured, each of which may be relevant to determining the final value.  Ultimately, the concluded valuation will reflect consideration of one or more of these approaches (and perhaps several underlying methods) based on those most indicative of value for the subject interest. This week, we take a look at how the income approach is used to value wealth management firms.

Wealth Management

The Anatomy of a Wealth Management Firm

A Closer Look at a Business that Continues to Pivot with Client Needs

Wealth management firms have significantly evolved over the last several decades for various reasons. For purposes of this post, we provide a bit of history on the industry, basic characteristics of today’s wealth management firm, and take a look at recent performance.

Current Events

Warren Buffett and the Intrinsic Value of Investment Management

A Few Reflections on the 2019 Berkshire Hathaway Shareholder Letter

In a world where non-stop financial commentary is as commonplace as it is tedious, one man’s market insights get an unusual amount of attention: Warren Buffett’s annual shareholder letter.   Buffett is an ironic icon of the investment management industry.  He’s made his fortune from active investment management, but regularly articulates his skepticism of the same.  He’s doubtlessly inspired more people to found RIAs than any other individual, yet his firm, Berkshire Hathaway, is not an RIA.  And his annual treatise on the performance of his company is full of common-sense wisdom that, based on Berkshire’s track record, is anything but common.

Call Reports

Q4 2018 Call Reports

Volatility Drives Investors to Low-Fee Passive Strategies

As we do every quarter, we take a look at some of the earnings commentary of pacesetters in investment management to gain further insight into the challenges and opportunities developing in the industry.

Asset Management Current Events

RIP to the Father of Index Investing

John Bogle’s Legacy Endures with the Prominence of Passive Investing

This week we say goodbye to perhaps the greatest advocate of passive investing. John Bogle’s contributions to indexing strategies and ETF investing have had huge impacts on both active and passive management, which we’ll address in this week’s post.

Practice Management

Five Questions to Ask Your P&L

A Great Start to 2019 is a Thorough Lookback at 2018

Now that January is almost over, we know that many of you have wrapped up quarterly investor communications and can now take a moment to think about your firm’s operations, direction, and other practice management issues. A useful place to begin your plan for 2019 is doing some fundamental research on your own business, starting with the P&L.


2018 Was a Banner Year for Asset Manager M&A

Asset manager M&A was robust throughout 2018 against a backdrop of volatile market conditions.  Several trends which have driven the uptick in sector M&A in recent years continued into 2018, including increasing activity by RIA aggregators and rising cost pressures.  Total deal count during 2018 increased 49% versus 2017 and total disclosed deal value was up nearly 140% to $18.0 billion.  In terms of both deal volume and deal count, asset manager M&A reached the highest levels since 2009.

Asset Management

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