RIA Valuation Insights

March 27, 2017 Practice Management

RIA Performance Metrics: Keep an Eye on Your Dashboard

A persistent truth about investment management is that no analyst ever saw a piece of information he or she didn’t want. Professional investors are, by their very nature, research hounds – digging deep into a prospective investment’s operating model, financials, competitive landscape, management biographies, and whatever else might be relevant to try to evaluate the relative merit of buying into one idea instead of another. This same diligence doesn’t always extend to practice management, though, and we are not infrequently surprised at how little attention management teams at RIAs devote to studying their own companies.

March 20, 2017 Transactions

Lean on Me

Active Managers Combine to Stem the Tide of Fleeting Assets

Albeit unlikely that Bill Withers was alluding to the plight of active management in his 1972 hit solo, it does appear to be an apt descriptor for recent dealmaking in the RIA sector. Standard Life’s $4.7 billion purchase of Aberdeen Asset Management earlier this month follows shareholder pressure to right the ship after years of significant underperformance from both firms. The market seems less convinced.

March 13, 2017 Practice Management

An All-Terrain Clause for your RIA’s Buy-Sell Agreement

Clients writing new buy-sell agreements or re-writing existing ones frequently ask us how often they should have their RIA valued. Like most things in life, it depends. We usually recommend having a firm valued annually, and most of our clients usually do just that. “Usually,” though, is subject to many specific considerations.

March 6, 2017 Current Events

Looking through the Buffett Brouhaha

The Oracle Still Believes in Human Innovation

Since I gave up politics for Lent this year, I’ve had more time to keep up with the deeper recesses of the financial press, which led me to Warren Buffett’s annual letter to the shareholders of Berkshire Hathaway. Buffett’s prose is a literary genre unto itself; a remarkably plain-spoken approach to making even the most complex and dull aspects of investment management simple and entertaining. If all “management letters” were penned as well, shareholders might actually read them. Perhaps that’s why they aren’t.

February 27, 2017 Current Events

Q4 Call Reports

As we do every quarter, we take a look at some of the earnings commentary of pacemakers in asset management to gain further insight into the challenges and opportunities developing in the industry.

February 20, 2017 Industry Trends

Investment Manager Pricing Takes the Scenic Route

Smaller public RIAs started and ended 2016 as a pack, but for about eight months performance was anything but similar. In what I can best describe as a wild ride to a close finish, at one point in July of 2016 Cohen & Steers (CNS) was up nearly 40% while Virtus Investment Partners (VRTS) was down over 30%. Seventy point divergences don’t happen very often, especially considering that, by Christmas of last year, the same spread narrowed to less than eight points.

February 14, 2017 Practice Management

RIA Matchmaking

Hardly a week goes by that we don’t get asked what we think are optimal qualities of an RIA merger partner. Answering that always feels a little like giving dating advice: different partners suit different partners. No one disputes that the industry is ripe for consolidation, but there’s no easy way to “swipe-right” on a target company’s ADV, and it’s pretty unlikely that sec.gov is going to have its own version of Tinder anytime soon. Nevertheless, in honor of today’s holiday, here are a few thoughts on what to think about when considering a merger partner.

February 6, 2017 Asset Management

Valuing RIAs

In essence, RIAs may be both highly profitable and prospectively ephemeral. Balancing the particular risks and opportunities of a given investment management firm is fundamental to developing a valuation. If you haven’t already, read our whitepaper covering this balancing act in this week’s post.

January 30, 2017 Asset Management Current Events Margins and Compensation

ESG Investing Comes of Age Despite (or Maybe Because of) Trump

Investment strategies that screen for environmental, social, and governance criteria (ESG) is a still developing product niche that has, until recently, been more about talk than action. The pitch is that investing in businesses that demonstrate broad-based corporate responsibility provides a pathway to management teams who think long term, mitigate risk, and lead their industries. The beauty of an investment product like ESG is client stickiness.

January 24, 2017 Industry Trends Transactions

RIA Deal-Making Was Flat Last Year but Poised to Surge in 2017

Despite a rocky year for asset manager valuations, sector M&A was still strong. Total transactions were down about 10% from 2015 while aggregate deal value increased close to 20%. Several themes from the prior year also persisted as wealth management acquisitions remained robust and banks continued to play a pivotal role on both the buy-side and the sell-side.