RIA Valuation Insights

March 18, 2022 Current Events

What Market Volatility Means for Your RIA

Is Volatility the New Normal?

It’s de ja vu all over again.  The volatility from the onset of the pandemic two years ago has been creeping back up as investors grapple with the global implications of the war in Ukraine.  At the end of last year, most RIA owners were enjoying peak AUM and run-rate profitability.  Since then, these measures have likely taken a substantial hit as the S&P 500 and NASDAQ are down 12% and 19%, respectively.  When this happened two years ago, the market made a sharp recovery in the preceding quarters, but looking forward, we don’t know where the bottom lies.  Most RIA principals are likely grappling with a sizable decline in management fees and earnings for the next billing cycle.

With taking a look at the VIX Index, we have assessed that the market volatility is likely here to stay – at least for a while.  In this post, we explore what this volatility means for you and your RIA.  

March 11, 2022 Current Events Industry Trends

Hot Inflation and Cold Markets: RIAs Hit With a New Storm Front

February’s CPI growth came in at 7.9% year-over-year (the highest level in recent memory), and the ongoing Ukraine conflict portends further supply chain challenges that could drive prices even higher.  The front-end of the yield curve has shifted higher as market participants reason that rising inflation will force the Fed to raise rates sooner and by a greater magnitude than had been previously anticipated.

Historically, a flattening yield curve has signaled an end to a growth cycle, and so far in 2022 that certainly seems plausible.  Markets are down and valuation multiples have declined significantly, particularly in high-flying tech stocks. Read this week’s post to find out what this means for the RIA industry.

March 4, 2022 Asset Management Industry Trends

Do RIA Investors Prefer Growth Over Value?

What Public Company and Transaction Data Multiples May Tell Us About RIA Investor Preferences

This week we look to understand why private market multiples for RIAs have consistently embodied more optimism than that of their publicly traded peers. In doing so, we identify RIA investor preferences unique to the industry, and why such multiples may even be misleading indications of your firm’s value.

February 24, 2022 Practice Management Wealth Management

Value Adrift?

If You Don’t Know What’s in Your Buy-Sell Agreement, You Don’t Know What You Own

In continuing the series on buy-sell agreements, this week’s blog post was inspired by the Felcity Ace cargo ship in which the ship was carrying several thousand new Porches, Bentleys, and Volkswagens when fire spread quickly. This circumstance ultimately produced a metaphor for RIAs. When RIAs are formed, they often enter into some kind of shareholder agreement whereby the parties agree upon rules to buy or sell ownership interests under given circumstances. No one thinks much about it because the expectation of a terminal event – like sale of the business or the retirement of a member – is so far off in the future. It’s like loading 4,000 cars on a ship and sending it out to sea, assuming that, at the end of the journey, the cargo will be reliably delivered and offloaded in good condition. No one thinks about the ship while it’s on the way from one destination to another until a fire breaks out.

February 17, 2022 Practice Management Wealth Management

Additional Considerations for Your Buy-Sell Agreement

Following up on last week’s post, this week, we offer four additional considerations that you should be addressing in your firm’s buy-sell agreement. We’ve seen each of these issues neglected before, which usually doesn’t end well for at least one of the parties involved.  A well-crafted buy-sell agreement should clearly acknowledge these considerations to avoid shareholder disputes and costly litigation down the road. We highly recommend taking another look at your buy-sell agreement to see if these issues are addressed before something comes up.

February 7, 2022 Practice Management Wealth Management

Three Considerations for Your RIA’s Buy-Sell Agreement

Working on your RIA’s buy-sell agreement may seem like an inconvenience, but the distraction is minor compared to the disputes that can occur if your agreement isn’t structured appropriately. Crafting an agreement that functions well is a relatively easy step to promote the long-term continuity of ownership of your firm, which ultimately provides the best economic opportunity for you and your partners, employees, and clients. If you haven’t looked at your RIA’s buy-sell agreement in a while, we recommend dusting it off and reading it in conjunction with the discussions in this blog post.

January 31, 2022 Industry Trends Wealth Management

Buy-Sell Agreement Basics for Wealth Managers

The Importance of Buy-Sell Agreements for Wealth Management Firms, and Why It Might Be Time To Revisit Yours

Over the next several weeks, we will be publishing a series of blog posts discussing the importance of buy-sell agreements and other adjacent topics for RIA owners.  Ownership is perhaps the single greatest distraction for advisors looking to grow with their firm, but it can also be an opportunity to align interests and ensure continuity of the firm in a way that is accretive for the firm’s founders, next generation management, and clients. In this week’s post, we emphasize how having a clear and effective buy-sell agreement is imperative to minimizing costly and emotional drama that may ensue in times of planned or unplanned transition.

January 24, 2022 Current Events Industry Trends

A B2B Fintech in the RIA Space Races to Market

Dynasty IPO Ticks a Lot of Boxes, and Begs a Few Questions

Last week we were surprised by a rare sighting, an S-1 filed by a prominent player in the RIA community. Dynasty Financial Partners seeks to raise $100 million in a public offering. The mercifully terse prospectus is less than 250 pages, and is recommended reading for anyone who swims (or fishes) in this pond.

January 17, 2022 Alternative Asset Managers Asset Management Industry Trends

Alt Managers Best the Market Along with Other Types of RIAs During a Strong Year for Investment Management Firms

Publicly traded hedge fund managers and PE firms nearly doubled in value during 2021. In this week’s post, we review the investment manager performance in 2021 by sector and AUM size and provide implications for your RIA in 2022 based on the results.

January 10, 2022 Asset Management Industry Trends

Asset Management Firms See Strong Performance in 2021

The asset management industry fared well in 2021 against a backdrop of rising markets and improved net inflows. Strong performance in equity markets was a major contributor to this performance. In addition, 2021 saw modest organic growth, although there were significant variances by asset class. In this week’s post, we discuss these issues and present our outlook for the industry.