Aging Advisors Scrambling To Sell Firms Amid Peaking Valuations - Report

Editorial Staff

15 August 2019

Valuations for US asset management companies seem to be peaking, driving aging investment advisors to sell, according to Mergermarket, an organization which tracks M&A activity.

Mergermarket said that MAI Capital Management's managing partner, Rick Buoncore, said that his firm is eyeing registered investment advisor targets which want to exit the business when their principal managers are more than 65 years old

Such a situation chimes with what Family Wealth Report has heard as being one of the drivers of today's brisk M&A market. The advisory business ECHELON Partners, which works with firms looking to buy or sell wealth businesses, said recent quarters show a steady rise in turnover.

The report also quoted David DeVoe, managing director and founder at DeVoe & Company, an investment bank and consulting firm that works with wealth managers. DeVoe said that some advisors are concerned about a potential future market crash, noting that valuations for RIAs dropped by more than 50 per cent in just 30 days during the 2008 financial crisis.

As FWR has also noted, the wealth industry faces a talent shortage because the average age of independent RIAs has been rising into the mid-50s in recent years, which creates an issue amid the expected $30 trillion transfer of wealth from Baby Boomers to the next generation.

Consolidation and M&A also create a dilemma: firms set up as independents and trading as such, but who sell up, could end up losing the standalone status that appealed to clients in the first place.