A weekly update on issues important to the Investment Management industry
In Q3 2023, while most publicly traded asset and wealth management firms experienced share price decreases in tandem with the broader market, alternative asset managers stood out with about 10% growth. This deviation can be attributed to factors like market volatility since 2020, which has boosted demand for stocks of alternative asset managers due to their more predictable revenue streams. Furthermore, the shifting market conditions highlighted potential implications for individual RIAs.
This post unravels how donating a portion of your RIA ownership before a sale can furnish you with a charitable tax deduction and minimize capital gains exposure. With practical examples, the role of Donor Advised Funds, and timely gift planning to bolster the value of your contribution, ensure maximum benefit for both you and your chosen charity, without the cumbersome tax burden.
During ATO’s annual meeting in New Orleans, industry experts weighed in on pressing topics for independent trust companies. Key discussions revolved around the limited impact of the FTC’s proposed ban on non-compete agreements, the potential advantages of AI in trust administration, and the unique financial trends and risks observed in the TrustCo sector. For those in the trust industry seeking insights on its current state, this conference provided invaluable perspectives and recommendations.
Global M&A activity has plummeted, and RIA consolidators have seen skyrocketing debt costs and eroding capital positions. Despite this, RIA M&A continues with little abatement. In this post, we dive into the factors supporting the relative strength of the RIA M&A market.
Steve Sanduski sat down with Matt Crow to talk about the state of the RIA industry for Steve’s Barron’s Advisor Podcast. In the episode, Steve and Matt explore the main drivers of the recent M&A environment for RIAs, the pros and cons of consolidation, and when selling to a consolidator makes sense instead of pursuing internal succession. Enjoy!
In a surprising move, Goldman Sachs has sold its Personal Financial Management (PFM) division, aimed at mass affluent clients, just four years after acquiring it for $750 million. The division wasn’t as profitable as Goldman’s core asset and wealth management businesses, prompting a pivot back to their expertise in ultra-high net worth clientele.
Measuring the financial performance of an RIA usually starts with GAAP statements, but it shouldn’t end there. Generally Accepted Accounting Principles (GAAP) have their place, but are too vague and nonspecific to provide much in the way of strategic direction for an investment management business. In this post, we propose a path to break down your financials into key performance metrics, giving your leadership a more constructive way to think about what builds value in an RIA.
The RIA industry is facing a potential succession crisis, with many firms still helmed by their founders and lacking in non-founding shareholders. Although succession planning is vital for the long-term success of these firms, it is often sidelined in favor of immediate growth strategies. This article delves into various solutions for RIA principals, from internal transitions to external acquisitions, highlighting their benefits and potential drawbacks.
Labor is the single largest expense for any investment management firm, but beyond that simple fact, there is surprisingly little similarity regarding how the thousands of wealth managers, asset managers, independent trust companies, and investment consulting firms pay their people. Compensation studies show considerable variances in how much firms pay for certain positions, and the character of remuneration — salary, bonuses, equity compensation, benefits — varies as a function of firm history, economics, and culture.
Part I of this series focused on variable or bonus compensation, this week we cover the equity component. If the other forms of compensation are meant to attract (salary) and retain (bonus) qualified talent, RIA equity is intended to align shareholder and employee interests while rewarding long-term contributions to firm growth and value. This structure inherently blends returns to labor (employee comp) with returns on investment (shareholder distributions) by its very design. It is typically the most complicated and misunderstood component of RIA compensation but can be highly effective when implemented correctly.
