Asset Management Industry Outlook
Over the last decade, investors have generally earned a higher net return by investing in passive vehicles rather than actively managed funds. Passive market share is now greater for U.S. equity investing than active. While large asset managers (i.e. BlackRock), are protected by sheer scale, how do small/mid-sized asset managers stay relevant in this environment?
Guest Post by Matt Sonnen of PFI Advisors
Early in the COVID pandemic, PFI Advisors published an article outlining how RIAs could perform an “Operational Diagnostic” to improve their profitability. Matt Sonnen wrote, “For now, advisors are focusing on exactly what they should be doing – guiding their clients through this turmoil and keeping them calm and focused on their long-term financial goals. When the time is right, however, I’ll forward this article to our clients so they can begin the work of focusing on the bottom line…”
Nine months later, most RIAs and their clients have recovered from the market volatility and ended up having a very good year, at least on paper. Now’s the time for RIA principals to consider how they can advance their firms to be ready to meet the next challenge with greater ease.
We’re featuring Matt Sonnen’s wisdom on operational best practices and business strategy in our upcoming conference, RIA Practice Management Insights, on March 3 and 4.
Deal Activity Rebounds After Brief Lull; Deal Terms and Multiples Remain Robust
After a brief lull during the second quarter of last year, RIA deal activity surged in the fourth quarter, rounding out a record year in terms of reported deal volume. Concerns about the pandemic and market conditions were quickly shrugged off, as deal terms and the pace of deal activity returned to 2019 levels after the brief pause at the peak of the shutdown.
Professionalizing the Business of Investment Management
We are excited to announce that we are putting together a virtual conference for RIAs that is focused entirely on operational issues – from staffing to branding to technology to culture – issues that are as easy to ignore as they are vital to success. The RIA Practice Management Insights conference will be a two half-day, virtual conference held on March 3 and 4.
2020 Mercer Capital RIA Holiday Quiz
As year-end approaches, we hope to spread some cheer with our RIA holiday quiz. Merry Christmas!
Goldman’s Recent Plans to Move Its Asset Management Division to South Florida, a Possible a Sign of More to Come for the Empire State
This week’s post analyzes recent RIA moves out of the Big Apple and what it could mean for your firm.
Catching a Falling (Butter) Knife
Last week, Macquarie Group announced its acquisition of Waddell & Reed (WDR) for $1.7 billion. At first glance, the pricetag implies an EBITDA multiple of over 11x and some are asking why Macquarie’s new CEO paid such a premium for a business whose AUM has halved over the last six years. Unfortunately, it’s not that simple. In this post, we dig into the deal economics and explain why paying a premium does not necessarily mean Macquarie over paid.
In last week’s blog post, we covered five considerations for designing earn-outs. While there is no one set of rules for structuring an earn-out, keeping those conceptual issues in mind can help anchor the negotiation. This week, we look at an example RIA transaction to illustrate how the considerations come into play when buyers and sellers are working out deal pricing and structure.
The Role of Earn-Outs in RIA Transactions (Part Two)
Like old sports cars, acquisitions don’t come with warranties, so protecting yourself against buyer’s remorse is critical. Even with escrows and punitive terms, you can’t guarantee that you’ll get what you pay for in an acquisition; but, with a properly structured earn-out, you can at least pay for what you get.
In part one of this series of posts, we explore the basic economics of contingent consideration and the role it plays in negotiating RIA transactions.