RIA Valuation Insights

A weekly update on issues important to the Investment Management industry

Industry Trends Transactions

RIA M&A Update

RIA M&A activity has remained resilient through the first quarter of 2023, even as macro headwinds have emerged for the industry over the past year.  Fidelity’s March 2023 Wealth Management M&A Transaction Report listed 68 deals through March 2023, up 19% from the 57 deals executed during the same period in 2022.  These transactions represented $108.3 billion in AUM—a 21% increase from the first quarter of 2022.

Industry Trends

Q1 2023: The Market Rallies, RIAs Stay Behind

RIAs started the quarter strong, but bank failures and interest rate hikes led to underperformance. Alternative asset managers, however, saw a last-minute rally during the final few days of the quarter, leading to this category outperforming the S&P during the period.

Current Events Practice Management

An RIA’s Independence Is Valuable

Selling Control Is Losing Control

Harry Truman kept a sign with his personal slogan, “The Buck Stops Here,” on his desk. The reverse side of his sign, which faced the President, says, “I’m from Missouri.” Specifically, Truman grew up in Independence, Missouri, and took pride in his hometown. RIAs would be well advised to value their independence as much.

Practice Management

Succession Planning for Investment Management Firms

The Best Time To Plan Is Now

Succession planning has been an area of increasing focus in the investment management industry, particularly given what many are calling a looming succession crisis. The demographics suggest that increased attention to succession planning is well warranted: over 60% of RIAs are still led by their founders, and only about a quarter of them have non-founding shareholders. Yet when RIA principals are asked to rank their firm’s top priorities, developing a succession plan is often ranked last.

Asset Management

The Relationship Between AUM Multiples and RIA Performance

AUM multiples are an often-cited valuation metric in the RIA industry as a back-of-the-envelope way to quickly estimate a firm’s value. The simplicity of AUM multiples is also the greatest pitfall. In our post this week we focus on the key drivers of AUM multiples and other ways to improve the value of your assets under management.

Industry Trends Transactions

Preparing for the Unknown Unknowns

The Importance of Sell-Side Due Diligence

Last weekend I had a chance to join my dad for the annual Concours on Amelia Island, a fantastic gathering of car collectors and interesting automobiles of all kinds and eras.  Coinciding with the weekend’s events were collector car auctions from all the major houses.  A cursory review of prices paid and those auction sell-through rates suggest that there’s not much of a recessionary cloud hanging over the economy yet—at least not the economy inhabited by classic car buyers. 

One car that caught my attention last weekend sold for a comparatively modest sum.  The beautiful 1949 Packard convertible pictured above and featured at the RM Sotheby’s auction brought just under $45,000.  If you’re younger than 65, you can be forgiven for not knowing Packard, as the marque was discontinued in the late 1950s.  Bad markets and a bad transaction got the best of a great automaker, which is a cautionary tale for anyone planning the future of their business. This week, we review lessons from the consolidation of the automobile industry that have merit in the RIA space.


When a Buyer Offers You Stock

Fairness Considerations in Equity Financed Transactions

Stock consideration is rarely discussed in RIA transactions but is a common financing feature in other industries. We expect to see more stock-for-stock deals in RIAs for two reasons. As debt financing becomes more expensive (and scarce) and consolidators start to question how much leverage they want to maintain, buyers will be tempted to use equity consideration instead of cash. And if capital gains tax rates rise and sellers can use rollover equity to defer gains, the structure will become more attractive to sellers. How can a seller decide whether or not to accept a suitor’s stock? Find out in this week’s post.

Current Events Industry Trends Wealth Management

As Deal Momentum Slows, What’s Next for Wealth Management Consolidation?

Early last year, as market conditions began to deteriorate, we (along with many others) predicted a coming slowdown in RIA M&A activity. Despite this environment, we were initially proven wrong: RIA M&A activity seemingly defied gravity as the pace of deal activity continued to keep pace with record 2021 levels. Now, the data suggests that deal activity is beginning to lose momentum. So, is the slowdown here to stay?  What does this mean for the future of deal activity?  In this week’s post, we discuss a few predictions for the year ahead.

Investment Management

Mercer Capital provides RIAs, trust companies, and investment consultants with corporate valuation, litigation support, transaction advisory, and related services