RIA Valuation Insights

February 11, 2020 Industry Trends

RIA “Comps” Don’t Always Tell the Same Story

Divergent Performances of LM, TROW, BEN, and AMG Show Industry’s Susceptibility to Company Specific Events Over Market Forces

Relying on comparable public company data in the valuation of your RIA can be tricky and the performance of the publics over the past 12 months bears that out. We don’t typically see a 40%+ increase in value (TROW) and a ~25% decline in a bull market (AMG) for two businesses in the same industry. So, it’s important to understand the impact of market forces but it’s more important to understand the unique nature of your business and what is in your control and what isn’t. This week’s post takes a deeper dive into this topic.

February 3, 2020 Transactions Wealth Management

Beauty is in the Eye of the Beholder

Drivers of Valuation in Wealth Management M&A

Fidelity recently published a study on M&A activity in the wealth management industry highlighting sellers’ ambitious expectations of the value of their firms Fidelity’s conclusion: sellers of investment management firms often “don’t entirely understand what drives valuation.” In this post we hope to provide insight to the owners of wealth management firms on how likely buyers value their firm.

January 27, 2020 Transactions

Are Sponsor-Backed Initiatives Distorting RIA M&A?

Barbarians at the Gate 2 – Electric Boogaloo

Investment management is a great business.  Firms that don’t need to sell, don’t sell. If transaction activity is up, does this mean that more firms need to sell?  If pricing and deal terms are better, are the transactions available today really that much more attractive than those available a few years ago?  And is the culture of consolidation that has emerged in the RIA community sustainable?

January 20, 2020 Transactions

RIA Consolidators Drive Record Deal Activity in 2019

Asset and Wealth Manager M&A Continues Decade-Long Upward Trend

Asset and wealth manager M&A continued at a rapid pace during the fourth quarter of 2019, rounding out a record year by many metrics.  Total deal count in 2019 rose 6% over 2018, reaching the highest level seen over the last decade.  While reported deal volume declined by 50% in 2019, this metric can be a less reliable indicator of transaction activity given the lack of disclosed deal terms and the influence of large transactions. In 2020, we expect several trends to continue as many of the forces that shaped the industry over the last decade remain in place. 

January 13, 2020 Industry Trends Margins and Compensation Wealth Management

Wealth Management: Then and Now

How the Wealth Management Industry has Transformed Over the Last Decade

As we enter the new decade, rather than taking time for self-reflection, we prefer to take a step back and reflect on the radical transformation of the wealth management industry over the last ten years. Wealth managers have been forced to adapt in order to maintain their client base and remain profitable, and while these changes have not been easy, they have transformed the industry into one that is more focused on its clients’ needs and better regulated to ensure the safety of its clients’ assets.

January 6, 2020 Industry Trends

All Classes of Investment Management Firms Outperformed the Market in Q4

2019 Was Also a Bull Market for the RIA Industry

As good as the fourth quarter was for the S&P, it was even better for the RIA industry. All classes of investment management firms bested the market, which was up 10% for the quarter. Continued gains in the equity markets have allowed these firms to more than recover from last year’s correction, and many of these businesses are now trading at or near all-time highs.

December 23, 2019 Industry Trends

‘Twas the Blog Before Christmas…

2019 Mercer Capital RIA Holiday Quiz

As year-end approaches, we hope to spread some cheer with our second annual RIA holiday quiz. Merry Christmas!

December 16, 2019 Asset Management

Will Your Succession be Successful?

A Few Things RIAs Need to Know

We’ve hesitated to put together a whitepaper on succession planning because so many people have already written excellent commentary on the topic. Nonetheless, when we surveyed what had been written about succession for RIAs, we didn’t see the kind of … Continued

December 9, 2019 Practice Management

Debt Financing for RIAs

How to Finance an Ownership Transition

As noted in a recent post, there are many viable options for RIA principals when it comes to succession planning.  One way to transition ownership while maintaining independence is to sell internally to key staff members.  The most obvious roadblock when planning for internal succession is pricing.  But once you establish a price, how does the next generation pay?  An internal transition of ownership typically requires debt and/or seller financing as it’s unlikely that the next generation is able or willing to purchase 100% ownership in a matter of months.  In this post, we consider the expanding options for RIAs seeking debt financing and the typical terms they can expect.

December 2, 2019 Transactions

Private Equity’s Silent Push into the RIA Space

Is Private Equity the Solution to Your Succession Planning Needs?

Private equity pervades the RIA industry, but most of their recent interest is through consolidators or roll-up firms.  In this week’s post, we’ll discuss the implications of this trend and other considerations for RIA owners’ contemplating the PE route.