RIA Valuation Insights

January 24, 2025 Valuation

Personal Goodwill: Implications for RIAs

Goodwill is an intangible asset representing the value of a business beyond its tangible book value. Investment management businesses generally have plenty of value beyond their tangible book value. Therefore, they have lots of goodwill that can be attributed to factors like the firm’s client relationships, the recurring revenue model, brand recognition, or employee expertise. Goodwill and the distinction between personal and enterprise goodwill can have important economic consequences in RIA transactions and disputes. Learn more in this week’s post.

January 17, 2025 Current Events Industry Trends Wealth Management

Reviewing 2024 RIA Performance: Wealth Management

The wealth management industry experienced remarkable growth in 2024, driven by robust market performance, inflation cooling, and shifts in monetary policy. Contrary to earlier concerns of economic instability, the year delivered substantial growth across the RIA sector, signaling resilience and adaptability in an ever-changing financial landscape. As the wealth management industry looks to 2025 and beyond, the dual drivers of demographic change and technological innovation will play a pivotal role in shaping its future. Firms that effectively embrace these trends—by deepening client relationships and harnessing cutting-edge technology—stand to emerge as leaders in an increasingly dynamic and competitive market.

January 10, 2025 Industry Trends

RIA M&A Update: Q4 2024

M&A activity in the RIA industry, which had been trailing 2023 levels for much of 2024, experienced a dramatic surge in October. This spike set a new record for monthly deal volume and brought year-to-date transaction figures through November in line with 2023’s pace. In this week’s post, we look at the convergence of factors driving a surge in M&A activity within the RIA industry and what that means for your RIA.

January 3, 2025 Industry Trends

RIA Market Update: Q4 2024

RIAs continued to outperform the S&P in Q4 2024, with alternative asset managers boasting an impressive 60% price gain year-over-year. In 2024, traditional investment managers saw the strongest AUM growth, while alternative managers proved better at converting this growth to revenue. We explore further in our Q4 2024 Market Update.

December 20, 2024 Industry Trends

‘Twas the Blog Before Christmas

It has become a tradition for the RIA team at Mercer Capital to end the blog year with a “unique” annual summary of industry events, riffing off Clement Clark Moore’s classic “A Visit from St. Nicholas.” We hope all of you in the investment management community are enjoying the holiday season and looking forward to the many opportunities of the new year. We look forward to hearing from you in 2025. For now, please enjoy the finest only holiday poem written about money management.

December 13, 2024 Practice Management Valuation

Are Difficult Partner Discounts Applicable to RIAs?

A few months ago, our team attended a business appraisal conference in Portland, Oregon, where we learned about a case involving a “Difficult Partner Discount.” Since we’re often hired when business owners can’t agree on price, we’re well aware of partnership disputes, but are pretty confident we’ve never directly applied a “Difficult Partner Discount” to the value of a business or interest therein. That doesn’t mean that partner disputes and departures can’t significantly impair the value of a company, which we address in this post.

December 6, 2024 Practice Management

The Four Types of RIAs

And What It Means for Practice Management

No two RIAs are identical but broadly speaking, firms that seek to serve the same types of clients tend to end up with similar-looking business models. A firm’s structure tends to reflect the types of clients the firm seeks to serve and the value proposition it offers to those clients. The result is that firms tend to cluster around a handful of distinct models, and identifying what those models are and how they differ can be a useful exercise both in analyzing a particular firm and in thinking about practice management issues.

November 27, 2024 Current Events Industry Trends

Recap or Rescue?

CI Financial Has One Kind of Leverage, ADIA Has Another

Abu Dhabi has been on a buying spree, announcing this week that their sovereign wealth fund was acquiring CI Financial, taking it private just over a year after a Bain-led consortium invested US$1 billion in the publicly traded investment management firm. We suspect the terms of the Bain deal formed the predicate to this week’s announcement.

November 21, 2024 Transactions

Whitepaper Release: Purchase Price Allocations for RIAs

There’s been a great deal of interest in RIA acquisitions in recent years from a diverse group of buyers ranging from consolidators, other RIAs, banks, diversified financial services companies, and private equity. These acquirers have been drawn to RIA acquisitions due to the high margins, recurring revenue, low capital needs, and sticky client bases that RIAs often offer. Following these transactions, acquirers are generally required under accounting standards to perform what is known as a purchase price allocation, or PPA. In this whitepaper, we describe the PPA process, including attributes unique to the investment management industry.

November 15, 2024 Current Events

How Will Trump’s Second Term Affect the RIA Industry?

Now that the dust has finally settled on the 2024 election, we can turn our attention to its expected impact on the investment management industry. One of the most impactful expected changes is new leadership at the SEC and a reversal of the prior administration’s ESG and crypto initiatives. It’s difficult to say how the market is digesting these prospective changes in the RIA industry, but the coming weeks will likely determine if the current SEC chairman is stepping down and who Trump’s appointee might be. In this week’s post we review these potential changes and their expected impact on the industry.