RIA Valuation Insights

December 15, 2023 Practice Management Transactions

7 Considerations for Your RIA’s Buy-Sell Agreement

Working on your RIA’s buy-sell agreement may seem like a distraction, but the distraction is minor compared to the disputes that can occur if your agreement isn’t structured appropriately.  Crafting an agreement that functions well is a relatively easy step to promote the long-term continuity of ownership of your firm, which ultimately provides the best economic opportunity for you and your partners, employees, and clients.  If you haven’t looked at your RIA’s buy-sell agreement in a while, we recommend dusting it off and reading our seven considerations for your RIA’s buy-sell agreement.

December 8, 2023 Margins and Compensation Transactions

Assessing an RIA’s Quality of Earnings

Don’t Pay a Premium for a Project

Quality of earnings projects look at aspects of profitability that go well beyond audited financials. They include detailed analysis of revenue and expenses, and derive a measure of normalized earnings more meaningful than simple reported results, even if the presentation of those results is accurate.

December 1, 2023 Current Events

Munger Games: Charlie Munger’s Legacy

And His Common Sense Approach to Business and Investing

As a tribute to the late Charlie Munger, we reflect on his legacy and wisdom. His distinctive perspective on cryptocurrency, diversification, and financial projections offers a unique approach to managing investments, contrasting with conventional practices. We provide our thoughts on his lasting Munger-isms.

November 17, 2023 Margins and Compensation Practice Management

Evaluating Your Firm’s Margin

An RIA’s margin is a simple, easily observable figure that condenses a range of underlying considerations about a firm that are more difficult to measure.  As much as a single metric can, margins reflect the health of a firm—indicating whether a firm has the right people in the right roles, whether it’s charging enough for services, whether it has enough (but not too much) overhead, and much more.  But when assessing your firm’s margins, it’s important to consider the context of the firm’s ownership and compensation structure and also the tradeoffs associated with margins that are too high or too low.

November 9, 2023 Practice Management

Speed, Velocity, and Momentum

The Best Measure of RIA Success

Market performance gives you speed.  Employee performance gives you velocity.  Practice management gives you momentum.  If you want to be successful, focus on building momentum.

November 3, 2023 Active Management Asset Management Industry Trends Margins and Compensation

Can Active Management Survive a Bear Market?

The recent analysis by Bloomberg highlights the potential for a bear market to intensify the challenges faced by active money managers, including fee pressures, asset outflows, and growing competition from passive investing strategies. Despite headwinds and the rising popularity of passive products, the resilience of some active management firms suggests a future where the industry might see less competition and more opportunity for alpha. Despite higher market caps than in 2008, asset management firms face a contraction in earnings multiples, suggesting a complex outlook that balances risks with the potential for restructuring and consolidation within the sector.

October 27, 2023 Industry Trends Transactions

Consolidation in the RIA Industry?

A Look at Record-Pace RIA Acquisition

In the midst of robust M&A activity, the RIA industry defies typical consolidation trends, continuing to grow with new firm creation outstripping the pace of acquisitions. This expansion has been propelled by a shift from the broker-dealer model to a fiduciary model, alongside the allure of building valuable, saleable enterprises.

October 20, 2023 Alternative Asset Managers Asset Management Industry Trends

Alt Managers Race Ahead

A Resurgent Year for Investment Management Firms

In the recent financial landscape, alternative asset managers have significantly outpaced other categories, particularly in the RIA sector, demonstrating resilience and impressive gains amidst market volatility. While traditional asset managers have seen some pressure, larger entities, especially those in private equity, experienced notable growth and stability, largely due to their robust structures and strategic partnerships. The current trends underscore the importance of understanding nuanced market shifts, what these developments mean for various asset managers, and investment approaches in an evolving economic climate.

October 13, 2023 Current Events Industry Trends Transactions

RIA M&A Update

Although inflation has begun to subside and the stock market has rallied after a turbulent start to 2023, elevated interest rates and macroeconomic uncertainty have contributed to a slight decline in deal volume so far in 2023. Despite the slight decline in deal volume, total transacted AUM increased. In this week’s post we discuss some of the contributing factors of this, and what it means for your RIA.

October 6, 2023 Industry Trends

Q3 2023: Alts Take the Lead as Other RIAs Lose Traction

Market Uncertainty and Fee Compression Trends Lead Investors to Take an Alternative Approach to RIA Investing

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.