FP Transitions launches valuation benchmarking tool for advisors

FP Transitions, the Portland, Oregon-based valuation and succession planning firm, has rolled out a new benchmarking tool designed to give financial advisory firm owners a faster, clearer read on what their businesses are worth relative to peers.

The tool, called the Estimated Value Index, assigns advisory firms a score from 1 to 100 based on financial data submitted through the company's FPInsights platform, with higher scores signaling stronger performance relative to comparable firms in FP Transitions' database. Rather than producing a single dollar figure, the Index gives owners a directional sense of where they stand against similar firms and the revenue multiple range their financial profile might support.

"For too long, many advisors have thought about the value of their business primarily when they were approaching a sale or succession event," said Brad Bueermann, chief executive of FP Transitions. "We believe enterprise value should be something owners understand, measure and intentionally build throughout the life of the business."

The rollout of the tool, announced Wednesday, arrives alongside a leadership change at the consultancy firm. FP Transitions has named industry veteran Tom Kimberly as its first chief operating officer, adding a technology and product background to a firm that has spent more than two decades building one of the industry's largest advisory-firm valuation and transaction databases.

Kimberly's résumé spans consulting, fintech and wealth management technology. He started his career at McKinsey & Company and Barclays; helped build the fintech startup Upside; then held senior roles at Betterment, where he led the Betterment for Advisors business, and at Fidelity Labs, where he oversaw innovation initiatives. More recently, he was part of the leadership at Edelman Financial Engines, overseeing product management, design, and engineering at the firm until his departure in October last year.

"FP Transitions has something exceptionally difficult to replicate: decades of direct experience working with advisory businesses through virtually every stage of their lifecycle," Kimberly said. "The opportunity is to take that institutional knowledge, combine it with data and technology, and make it increasingly useful to advisors in the decisions they are making every day."

"Tom is both an operator and a builder, and that combination is exactly what we need for this next chapter," Bueerman said, pointing to the "extraordinary foundation of data, expertise and relationships across the advisory profession" that his firm has built to help advisory practice owners. 

The Index is free to advisors with an FPInsights account. Users must complete a Firm Snapshot to generate a score, which they can update as their business changes.

Read more: RIA consolidators say they want big firms — but keep buying small ones

Holding RIA deals up to the light

FP Transitions is not alone in trying to bring more data and technology into a deal process that advisors have long described as opaque. Last fall, Charlotte, North Carolina-based Alaris Acquisitions launched its own Buyer Portal, a database profiling more than 70 RIA buyers that lets sellers research potential acquirers, including video interviews, before entering formal talks.

"The matching mechanism is math, not fit," Darby told InvestmentNews in an interview last year, commenting on the current system that drives dealmaking. "It's not measuring culture; it's the size of your check."

He described the current process for sellers vetting multiple buyers as "a death of 5,000 paper cuts," since sellers often have to repeat the same disclosure process with every prospective acquirer.

Read more: RIA dealmaking races to a record pace as consolidators bulk up on scale

In a more recent conversation, the co-founders of Green Sail Capital Partners argued that the reality for today's sellers isn't quite as rosy as the lofty headline numbers would suggest. Among deals they've seen closed, valuations have been anywhere from 7 to 18 times EBITDA, driven by an array of idiosyncracies including the caliber of the brokers and matchmakers involved, as well as the specifics of the firm being sold.

"That's a pretty wide range," Christopher Gent, co-founders of Green Sail Capital Partners, told InvestmentNews. "That just goes to our thesis that there's a lot of value in hiring the right representation."