Whitepaper Release: How to Value a Wealth Management Firm

Wealth Management

Renault Twizy: 70 kilometers of battery powered range and tandem seating for two

Bermuda is 21 square miles of lush perfection in the middle of nowhere.  About 70,000 residents live on this small coral outcropping that sits 600 miles off the coast of North Carolina, and if it were not for property and casualty insurance underwriting, it would probably just be a tourist stop for cruise ships like much of the rest of the Bahamas.  As it is, the combination of zero corporate income taxes, access to the British legal system, and proximity to key markets in the U.S. has made Bermuda a bastion of global commerce, boasting the highest per capita corporate profitability of any nation or territory.  Not to mention the only place I know where it’s acceptable to wear shorts with a jacket and tie.

What Bermuda doesn’t have much of is space, and not wanting to cover the bit they have with pavement, the island has always restricted access to personal vehicles.  There are no rental cars on the island, for example, so tourists and many locals have historically gotten around by scooter.  Scooters are fun if you know what you’re doing, but my family doesn’t – so I was relieved when we got there for vacation earlier this month to discover an alternative, the Twizy.  The Twizy is a battery-powered two-person “car” that could be the future of motorized transportation for urban areas: clean and quiet and much less likely to land you in the emergency room.

A defining characteristic of the development of most professions is the division of labor into sub-specializations.  Knowing more and more about less and less appears at first to be an exercise in limiting oneself, but professional specialization in areas like law and medicine has benefited both practitioners and clients.  I was thinking about the development of specialization in the RIA world while I was exploring Bermuda in the Twizy with my older daughter, who sat behind me in the car and navigated while I focused on staying on the wrong side of the road. With our respective roles both defined and co-dependent, we had a lot more fun than we would have if either of us had tried to be both pilot and navigator while the other just rode along.

Investment management is a younger profession than many, but it too has evolved and is evolving, into an industry of sub-specialties of manufacturing (asset management) and distribution (wealth management).  Wealth management is in a dynamic period, with changing client service models, challenges to profitability, the augmentation and distraction of technology, consolidation in some ways and fragmentation in others.

Recognizing this, our team thought it would be useful to put together a whitepaper on valuation issues that are unique to the wealth management industry.  While there are certainly characteristics of wealth management firms that are common to all RIAs, there are enough distinctions to caution anyone from painting the profession with too broad a brush. Enjoy!



How to Value a Wealth Management Firm

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