As the temperatures moved toward 100 degrees in Phoenix, panelists at Sunday’s inaugural Wealth/Stack conference said deal-making in the advisory space is hot and getting hotter.
“There is an unprecedented level of activity,” said FP Transitions President David Grau, and not just for large deals. Firms with assets of $4 billion or less are also active in the marketplace.
“More people are contemplating selling what they built,” Grau said to a crowd of about 700 advisors and other guests. This month, FP Transitions has worked on about $40 million worth of sales and expects to see 20 transitions, he added.
“The buyers are lined up deep and have bank financing. Five years ago, there was no such thing,” Grau explained. “Now, everyone’s talking to banks.”
Ken Auspaker, a managing director of Evercore, says the wirehouse firms and large consolidating RIA platforms are providing financing, too. “There are lots of opportunities for RIAs.”
Let’s Make a Deal
Rather than focusing on what price they are paying, potential buyers should focus on other terms, Grau says: “Take valuation off the table. The seller’s going to win that. How about the transition plan to get 95% of clients over [to the buyer] and getting the payment and finance terms [you want]? Don’t worry over the price. It’s the [other] terms and taxes.”
As for succession planning, advisors need to get real, the panelists said.
“It’s great that there’s a bull market” for advisory-firm M&As, said Lake Avenue Financial CEO Alex Chalekian. “But you don’t want to wait until you have to make a move.”
Grau explained: “Many advisors are thinking, ‘Someday when I leave, I will find out what the 85:1 [ratio of buyers to sellers] can bring me.’ But … only one in 10 will sell, not the rest.”
In order to sell, you have to build a practice that is sustainable, meaning it has a succession plan “that outlives you,” he said, “and that lives the length of your clients’ lifecycle.”