According to WealthManagment.com, there is no better time for Registered Investment Advisors (RIAs) to sell their practices.
Recent data indicates that 2021 has set the record for RIA merger and acquisition (M&A) activity for the eighth consecutive year. WealthManagment.com provides a list of factors to consider before negotiating with an RIA aggregator.
- Potential for an Immediate Negative Return on Investment (ROI)
Many aggregators generate financial projections that look at how the company may perform in the future, given a broad range of assumptions (often called "proformas"). It is common for aggregators to have one proforma that looks at the most favorable assumptions and produces a set of outcomes that can look attractive. If an aggregator shows you an attractive proforma, then the chances of your business being overvalued are fairly high.
- Organic Growth is Largely Irrelevant
Aggregators are primarily focused on inorganic growth. The majority of their marketing resources are spent on supporting the corporate brand, promoting their leadership team in the media, and other tactics that raise the profile of the firm at large
- A Unified Practice Management Model Does Not Exist
Many aggregators take a technology-first approach. However, most aggregators do not provide coaching for their advisors to get the most out of processes, platforms or extended teams.
- Tech Stacks are Outdated
WealthManagment.com shares the importance of not settling for a team that lacks experience with the technology that best fits your firm and clients. Several aggregators that are growing quickly today are simply well-capitalized. Once they have exhausted the market of their broker-dealer network, they must look outside of the network for new teams. As a result, they also have to become multi-custodial, which presents a challenge for advisors who are used to their independence or seeking more of independent infrastructure.
Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.
