RIA Valuation Insights

March 10, 2023 Industry Trends Transactions

Preparing for the Unknown Unknowns

The Importance of Sell-Side Due Diligence

Last weekend I had a chance to join my dad for the annual Concours on Amelia Island, a fantastic gathering of car collectors and interesting automobiles of all kinds and eras.  Coinciding with the weekend’s events were collector car auctions from all the major houses.  A cursory review of prices paid and those auction sell-through rates suggest that there’s not much of a recessionary cloud hanging over the economy yet—at least not the economy inhabited by classic car buyers. 

One car that caught my attention last weekend sold for a comparatively modest sum.  The beautiful 1949 Packard convertible pictured above and featured at the RM Sotheby’s auction brought just under $45,000.  If you’re younger than 65, you can be forgiven for not knowing Packard, as the marque was discontinued in the late 1950s.  Bad markets and a bad transaction got the best of a great automaker, which is a cautionary tale for anyone planning the future of their business. This week, we review lessons from the consolidation of the automobile industry that have merit in the RIA space.

March 3, 2023 Transactions

When a Buyer Offers You Stock

Fairness Considerations in Equity Financed Transactions

Stock consideration is rarely discussed in RIA transactions but is a common financing feature in other industries. We expect to see more stock-for-stock deals in RIAs for two reasons. As debt financing becomes more expensive (and scarce) and consolidators start to question how much leverage they want to maintain, buyers will be tempted to use equity consideration instead of cash. And if capital gains tax rates rise and sellers can use rollover equity to defer gains, the structure will become more attractive to sellers. How can a seller decide whether or not to accept a suitor’s stock? Find out in this week’s post.

February 23, 2023 Practice Management

The Relationship Between Revenue Multiples and EBITDA Margins

Revenue multiples are cited perhaps as much as any other valuation metric in the RIA industry. In this week’s post, we focus on their key drivers and ways to improve the value of your management fees.

February 17, 2023 Current Events Industry Trends Wealth Management

As Deal Momentum Slows, What’s Next for Wealth Management Consolidation?

Early last year, as market conditions began to deteriorate, we (along with many others) predicted a coming slowdown in RIA M&A activity. Despite this environment, we were initially proven wrong: RIA M&A activity seemingly defied gravity as the pace of deal activity continued to keep pace with record 2021 levels. Now, the data suggests that deal activity is beginning to lose momentum. So, is the slowdown here to stay?  What does this mean for the future of deal activity?  In this week’s post, we discuss a few predictions for the year ahead.

February 10, 2023 Asset Management Current Events Industry Trends

Investment Management Is a People Business

Who’s in the Driver’s Seat?

Investment management is a people business, and there are aspects to a people business which do not yield to financial modeling. This week, Matt Crow addresses industry conundrums for which there are no easy answers.

February 3, 2023 Asset Management Margins and Compensation Practice Management

Whitepaper Release: Compensation Structures for Investment Management Firms

For this week’s post we’re introducing our whitepaper on compensation structures for investment management firms. This whitepaper is designed to help you navigate the various compensation models to optimize firm growth and employee retention.

January 26, 2023 Current Events Margins and Compensation Practice Management

What Does the FTC’s Proposed Non-Compete Ban Mean for RIAs?

Earlier this month, the Federal Trade Commission (FTC) announced a proposed ban on non-compete agreements in employment contracts.  If enacted, the proposed ban would prohibit a common provision of employment agreements that employers use to limit employees’ ability to compete.  

January 20, 2023 Industry Trends Wealth Management

Wealth Management in Turbulent Times

Navigating the Challenges Ahead

2022 proved to be a challenging year for the stock market as a whole and the RIA industry.  With persistent inflation, rising interest rates, a tight labor market, and heightened geopolitical tensions, it’s no surprise that this resulted in the decline of nearly all stock market sectors over the last year, which was especially true for the RIA industry. But with the prospect of a potential recession in 2023, the worst may still be ahead. 

January 13, 2023 Industry Trends Transactions

RIA M&A Update

RIA M&A activity set new records in 2022, even as macro headwinds for the industry emerged throughout the year. However, deal volume was most significant in the first half of 2022 and began to cool in the second half of the year, particularly in the fourth quarter. Although transaction volume is still up over the prior year, there has been a decline in the size of these transactions.

January 6, 2023 Industry Trends

The Eye of the Storm

RIAs Outperform the S&P 500 in Q4 2022

The RIA industry saw a strong fourth quarter rally, driving most categories of publicly traded investment managers to outperform the S&P in the last quarter of the year. Alternative asset managers, however, declined from their early-November peak to perform in line with the S&P during this period. In our blog this week, we take a look at the performance of the RIA industry by sector and AUM in the fourth quarter of 2022.