Independent registered investment advisers work tirelessly for decades to build and grow their businesses. But for many firm owners, there comes a time when selling may be the best option to achieve business or personal goals.
This process is never simple and will have highly emotional elements. The trend is also becoming increasingly prominent, as 2021 marked a record year for M&A deals in the wealth advisory industry, and convergence isn’t slowing down in 2022.
As an M&A adviser, we’ve helped hundreds of RIA owners value, buy, sell and merge firms over the years, including several firms with more than $1 billion in AUM. A few of our clients who recently sold their businesses shared advice on three key considerations:
Perhaps the paramount concern for any RIA contemplating a sale is how it would affect employees and clients, especially if they’ve been with the firm for decades. If this is a key consideration for you too, it’s crucial to seek a buyer with similar values.
Kevin VanDyke sold his $1.8 billion Michigan-based hybrid firm, Bloomfield Hills Financial, to Newport Beach, California-based SageView in October 2021.
“Many of us had been working together for 10 or 20 years and are like family,” he said. “We needed to maintain that feeling as we grew. When we brought in new partners, we treated them like family too.”
When evaluating potential buyers, Dwight Mikulis, who — along with his partners — sold $2.4 billion Pinnacle Advisory Group in Columbia, Maryland, to Boston’s Congress Wealth Management in April 2021, wondered, “Would they bring on all of our employees? Would they treat our advisers with care and not reduce their compensation in order to pay for the deal?”
A third client, Will Mullin, sold his closely held firm Villanova Financial Services to Malvern, Pennsylvania-based Hoover Financial Advisors in 2017 before agreeing with his business partner in 2020 to sell that $1.5 billion merged firm to well-known aggregator Wealth Enhancement Group.
“We needed a buyer who believed in what we do, which is taking a holistic approach to financial planning as a fiduciary,” Mullin said regarding the latter transaction. “We weren’t willing to walk away from any of the services that we offer to clients. They’re friends, families, neighbors and former co-workers, and we made a promise to take care of them.”
For RIAs considering a sale, a common motivator is an interest in scaling effectively and a realization that this goal might entail merging with a larger business. Some of our clients have pursued increased scale that included additional services and solutions, better technology and platforms, marketing expertise, broader referral networks or even the reputation and brand of a bigger firm to help attract talent.
Mikulis’ decision to sell was based on the need both to grow and to create a succession plan. The firm’s senior partners were looking to retire and none of the minority partners wanted to take over. By selling, the firm was able to grow while allowing the senior partners to exit.
“We understood that doubling the business would require taking on debt along with multiple locations, and developing a strong bench of managers who could do ‘deals’ while the staff served our clients,” he said. “But we didn’t have enough time before retirement to properly commit to that. Our firm was highly profitable, with really good investment and adviser teams. So we realized that a buyer could catapult off our base in the mid-Atlantic region, using our structure to tuck in smaller firms and grow clients and assets managed.”
Many of our clients reflect that it’s vital throughout the sale process to work with a great team, from accountants to lawyers and advisers. VanDyke emphasized the importance of having an adviser who can navigate negotiations professionally, as both the prospective buyer and seller might have questions for the other that could seem abrupt or sensitive.
“Diplomacy helps build a solid foundation, because the transaction is your first impression of each other,” he said. “The buyer and seller may have a relationship for the next 20 years, so it’s important to start off on the right foot.”
Selling your firm is a momentous decision that greatly impacts employees and clients, as well as your own legacy and wherewithal. The process can easily take six months to a year or even longer, and finding the right fit is fundamental. Amid the dizzying area of factors to consider, expert advice can help make this process smoother and likelier to produce an optimal outcome.
Michael Bilotta is president of Gladstone Associates, an M&A advisory firm that works with RIAs and independent broker-dealers.
From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.
Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.
“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.
Sellers shift focus: It's not about succession anymore.
Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.
RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.
As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.
