RIA Valuation Insights

July 14, 2020 Current Events

FULL Disclosure: The SBA Outs the Investment Management Industry’s Participation in the PPP

We spent some quality time with the SBA’s release of PPP borrower data to see what impact the program has had on the investment management industry. After scrubbing out some misclassified businesses, we found more than 2,400 program participants (RIAs, trust companies, financial planning firms, etc.) that borrowed at least $150,000 (a separate release covered smaller loans). Even though the borrower pool is relatively small (there are at least 10,000 RIAs that aren’t participating), the demographics of the pool are telling.

June 29, 2020 Trust Companies

Whitepaper Release: Valuing Independent Trust Companies

The situation giving rise to the need for a valuation could be one of the most important events of your professional career.  Familiarity with the various contexts in which your firm might be valued and with the valuation process and methodology itself can be advantageous when the situation arises.  To this end, we’ve prepared a whitepaper on the topic of valuing interests in independent trust companies. 

June 24, 2020 Current Events

What Market Volatility Means for your RIA

Is Volatility the New Normal?

If one thing has become clear, it’s that market volatility is here to stay – at least for a while. In this post, we explore what this volatility means for you and for your RIA.

June 15, 2020 Industry Trends

The Evolution of Rule-Based Valuation Metrics and Why They Still Don’t Work

One of our first blog posts addressed the fallacies of rule-based valuation measures in RIA transactions.  Our position hasn’t changed, but these so-called rules of thumb have certainly evolved over time.  In a recent podcast with Michael Kitces, industry transaction specialist Elizabeth Nesvold of Raymond James explains the history and rationale behind these changes.  For this week’s post we’ll discuss this evolution and why such measures are usually more misleading than meaningful.

June 9, 2020 Practice Management Wealth Management

Pandemic Practice Management Opportunities

RIAs are Taking Advantage of this Time to Revisit Shareholder Agreements

You’ll probably find that the “downtime” afforded by working remotely and traveling less is a perfect time to clean up some practice management issues, including your buy-sell agreement. So pull your shareholder agreement out and compare it to our whitepaper.

June 1, 2020 Current Events

So You Got a PPP Loan, Now What?

In order to mitigate the potential impact of the COVID-19 crisis, many RIAs applied for and received loans under the Paycheck Protection Program (PPP) established by the CARES Act. Now that the loans have been received and disclosure is strongly advised (if not mandated), many RIA owners are wondering what signaling effect the loans will have on clients. Will clients view PPP loans as a sign their advisor is experiencing financial strain or on the verge of financial insolvency? Or will clients view it as a precautionary measure rather than a last-ditch effort to stay afloat financially?

May 26, 2020 Practice Management

The Family Office

Managing Family Wealth Since 27 BC

Educating your family about how your wealth and/or family business is managed is essential for the preservation of your family legacy. In this week’s post, we discuss family offices. Private investment office…  Family business advisor… Single-family office… The name differs and the definition varies greatly depending on whom you ask. But the concept remains the same. Wealthy families often seek assistance to manage their accumulated wealth, organize family affairs, and preserve capital for future generations.

May 18, 2020 Industry Trends

Why Are Small Cap RIAs Down 40% Over the Last Year?

Most Investment Managers Remain in Bear Market Territory Even as the Broader Market Recovers

Believe it or not, the S&P 500 is exactly where it was a year ago.  It’s been a wild ride, but most diversified investors probably haven’t done as bad as they think during this time.  Unfortunately, that’s not the case for the RIA industry, which is still reeling from the Coronavirus pandemic and numerous other industry-specific headwinds.  Such a divergence is unusual for an industry tied to market conditions, so this week we analyze the driving forces behind this disparity.

May 12, 2020 Current Events

Are Public RIA Dividend Yields a Mirage?

Investors Quarantine Their Positions Despite the Search for Income, Strong Fundamentals

Since the Coronavirus pandemic settled into the American consciousness in mid-March, industry pundits have been actively musing about the impact of the crisis on the RIA community.  RIA operations are mostly unaffected by this pandemic, and RIA financial performance has been supported by massive central bank intervention.  None of this explains the pricing of publicly traded RIAs, however; especially when you look at the impact that slumping valuations have had on RIA dividend yields.

May 4, 2020 Asset Management

Outlook for Asset Management Firms Amid COVID-19

Falling Asset Prices Threaten Profitability as Spotlight Turns to Relative Performance

Active managers have generally underperformed their benchmarks over the past 10 years, which has driven outflows into low-fee passive products. The extreme financial market volatility and dispersion over the last two months has created major price dislocation and the potential to generate outperformance. The current environment may well be the time for active managers to prove themselves by protecting clients’ assets relative to index performance and justifying their fees.