RIA’s: When is it Time to Sell Up?

More and more registered investment advisers are becoming involved in mergers and acquisitions than ever before, but how do you know if it is the right time to do so?

A total of 153 mergers or acquisitions in this field were registered in 2017, which represents a fourth consecutive record year.

A report from DeVoe & Co suggested that the majority of transactions took part in the early part of the year, slowing as the year went on. The report’s authors suggested that this record-breaking figure might have been higher had it not been for the delay of the DOL rule’s implementation. The delay left some uncertainty as to whether it would be introduced at all, and this resulted in the wave of activity grinding to a halt.

In spite of the record amount of deals being made, the average cost of the deal dropped to $881 million, from just over $1billion in 2016. This was due to larger amount of small deals being agreed.

The size of the deal on the table is obviously a huge factor as to when an RIA should consider selling up, but it’s the only consideration that should be made. Here are two other key factors:

The Business Climate

The potential value of your business will fluctuate due to market conditions. During a good economy, advisers will find that more clients are willing to pay big money for assistance with their finances. When the economy is slow, clients are harder to find and the potential value of your business drops. The best strategy for those looking to get out of the advisory game is to sell during a good economy, when the potential value of your business is at its highest. Selling during a poor economy will leave with a dud deal more often than not.

Either way, you also need to consider how much potential there is for future growth, and whether the path to achieve this is one that you’re willing to walk down.

Passion Vs Exhaustion

The financial advisory business is very stressful. Mistakes can cost clients a significant amount of money. There are ups and downs to deal with every day. It’s a job that requires great passion to avoid being overwhelmed. Still, there can come a point where passion fades and exhaustion takes over.

Ask yourself: do you find yourself feeling more passion or exhaustion? If it’s the latter, selling might be a great option even if you feel the bid on the table doesn’t quite match your expectations. Some things are more important than squeezing every last penny out of your investment business, such as your overall health and happiness.

Even if you are achieving great success as an RIA, it is perfectly natural to have desires to try other ventures in your life.

At Succession Link, we specialize in helping business owners find the perfect successor for a business they want to sell, so that they can be assured their clients and staff members are in safe hands. Click the link to find out more about our business model.

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