Valuation Insights: What Contributes to the PRICE of a Financial Advisory Practice?

by Jeff Nash, Founder & CEO, BridgeMark Strategies

May 29. 2024

In today’s increasingly competitive RIA M&A market, there are 50 buyers for each seller. For students of supply/demand economics or fans of Adam Smith, such a disparity should create a bonanza for sellers. Yet, that’s not always the case. Of course, top sellers are getting top offers, as is the case in any market, but once out of that top tier, advisors are not garnering commensurate interest for what are still good businesses. This seeming disconnect between classic economic theory and current reality is a function of how price is calculated when executing transactions in the wealth management space.

Creating scale remains a driver of M&A activity on the buy side, while the aging advisor population motivates the selling. That aside, there’s always a good reason to make a great deal. However, given the higher cost of capital, buyers are being more strategic, creative and circumspect in their transactions.

The truth is that not every seller has a great product, and not every buyer will offer a great deal. If you are a seller whose business checks all the boxes and you are engaging with a buyer possessing the resources to put a great offer on the table, it’s game on.

I’ve seen a lot in my 30-plus years in the industry, including this truth: five elements consistently come into play during the dealmaking process when determining the price of an advisor’s business. I created an acronym of the word PRICE to help everyone remember and easily understand the five factors that influence PRICE.

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