Selling Your RIA
In the first quarter of 2021, there were approximately 60 transactions related to the sale of Registered Investment Advisers (RIAs) in the United States. In the entirety of 2020, however, there were a total of 160 RIA related transactions, putting 2021 on track to beat that record.
The RIA industry is rapidly consolidating and RIAs are being sold at an unprecedented rate. Industry consolidation affects all RIAs and needs to be considered in your strategic plan.
Every RIA should be thinking about the valuation of their firm, succession plan, and whether a sale makes sense for them.
As competition transforms into the form of large, built-to-scale RIAs capable of offering attractive rates and expanded services, you may wish to explore the valuation of your company and an alternative path for the future of your organization.
At Four Leaf Business Consulting, helping companies like you is what we do. Having been immersed in the RIA universe for 25 years, we have the expertise necessary to understand your business. With direct transactional experience with both the sale and buy side of an RIA transaction, as well as the integration process into larger organizations, we offer the skills to assist you in exploring all aspects of a sale. Our hands-on approach to this industry allows us to provide clients with effective advice related to the value and selling process of your RIA.
Our Process
Clients seeking to sell their RIA can rely on our experience with both the sale and buy side of these negotiations, transactions, and integrations.
Planning
PlanningThe success of any succession, transaction, or transition plan is dependent on careful and attentive planning. Remember: when it comes to selling your RIA—or any business, for that matter—preparation and research are key.
During the planning stage of our interaction with your firm, you will be given a dedicated space to discuss how to monetize the business effectively. One of the most significant considerations Four Leaf will help you work through is whether to transfer ownership of your RIA to the next generation of your professionals, selling to another firm, or considering outside investor capital or private equity options.
Where do your goals and values lie? Four Leaf will help you realize them and prepare you for the difficult decisions and processes before you.
Competition and Scale
The consolidation of the RIA industry means firms are “rolling up” client-facing professionals under a scalable infrastructure built on a foundation of consolidated reporting, compliance, technology, employee retention—expanding client services and remaining fee competitive. Smaller firms will have difficulty competing with these consolidated firms “built to scale,” and they will need to look at the future path for their firm, clients, and employees.
How Will Four Leaf Help You Sell Your RIA?
A potential buyer will need to fully understand the unique offerings, expertise, value, and growth prospects of your firm. Below are just a few of the elements Four Leaf will help you prepare with a review from a buyer’s perspective prior to introductions to the market:
A Potential buyer will want to look at the following areas of your business:
Profitability and Revenue
We will conduct not only a review of the P&L, but also an analysis of the historical growth as it relates to the industry and the financial markets. How has revenue and profits changed over the years? What are the drivers of growth, and are there any setbacks? How does your firm compare to the industry and financial markets? Is growth organic to the firm, its people, and business development, or is it driven from some other source (acquisition, new hire, retirement of key advisor, etc.)?
EBITDA
EBITDA is often a measurement used by buyers to determine valuation. We will look to review your EBITDA with you and determine any non-recurring costs while also reviewing your pro forma EBITDA.
AUM
How have the assets under management changed over time? What are the reasons for the change in AUM? How does it compare to your peers and the market?
Expertise
What is it that makes your firm special? What value is there in your services, advisors, or other offerings that make you stand out?
Clients & Advisors
How does your client makeup stack up against your peers, potential buyers, and others looking to sell? How diversified is your client base? How long have the clients been with you (retention)? Who are the key advisors, and what is the amount of clients, revenue, and AUM under their relationship?
People
We will conduct a thorough review of your professionals and staffing. How many layers are there to the organization? What is the “cost” to service a client? What is your expertise? Are your expertise, services, and advisors properly priced compared to your peers?
Compliance
Have you been examined by the SEC? Has a third-party reviewed your compliance manual procedures and testing? What risks have been identified, and how have they been mitigated? How does a strong compliance program add value to your firm?
Operations
What is your workflow and the resulting deliverables to your clients? What systems do you use? How is data from custodians and investment products processed and reconciled? How will your operations and client reporting merge with the Buyers operations? Will you continue to report and service your clients in a way they have come to expect? How will billing processes, fee schedules, and fee collection integrate? Are the investment Platforms compatible? What due diligence or investment approval process will your platform need to integrate to the Buyers platform.
Infrastructure
How does your office space and technology compare in quality and cost to the buyers standards? What systems, software, licenses. real estate, leases, equipment and intangibles would be of value to a buyer?
Scalability
A buyer will look into the state of your infrastructure, real estate, processes, technology, vendor contracts, software licenses, and much more to determine how your business will scale and offer economies to their existing model. We can help you identify these and add to your pro forma EBITDA and valuation.
We will help you consider, prepare, and analyze the sale of your business, working with and for you while you concentrate your efforts on servicing your clients.
Selling a Non-RIA Business?
Four Leaf is prepared to help any business seeking to sell. Regardless of your business goals or needs, we’re here to make the selling process as smooth as possible. Avoid an uphill battle of negotiation with presale planning and Four Leaf.