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Industry Spotlight > RIAs

Lessons Learned From Selling an RIA Firm

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What You Need to Know

  • It's important to constantly evaluate your strengths and weaknesses.
  • In assessing a potential partner, consider whether they can benefit clients, employees and owners equally.
  • Whenever you think would be the right time to seriously consider your succession plan, start sooner than that.

My partners and I founded RGT Wealth Advisors more than 35 years ago, steering it through myriad economic environments during the last several decades. Understandably, our connection to this RIA firm grew to be deeply personal in addition to financial, as its AUM eventually reached nearly $5 billion. While we felt the time was right last year to sell a majority stake to a diversified global asset and wealth management company, it was no easy call to make.

Through the years, our firm has been driven by three primary motivations: (1) client service, (2) combining financial planning with investment management and (3) being fee-only and remaining independent of Wall Street in sourcing investment solutions. We’ve stayed true to those founding principles as the firm’s capabilities grew tremendously from an expertise and depth perspective.

At the time of the transaction last November, we had 16 owners and about 70 employees. Our leadership structure included traditional department heads as well as a seven-person Executive Committee that balanced different skill sets and generational perspectives. With so many other RIAs across the country also contemplating succession planning, I wanted to share the thinking and process behind our recent sale.

Internal Assessment

For most of us who came into the industry and launched RIAs, we began as practitioners but now work on the business as much as we work in it. As a result, we’ve disciplined ourselves to look far down the road when planning for the future of the firm, whether we expect to remain part of it or not.

A little over a year ago, our Executive Committee conducted a three-year update on a 10-year strategic plan we had instituted in 2017. Although we came away from that review feeling good about the future, we realized the luxury of time had slipped away for some important aspects of the business. The wealth management space is an evolving business model in an ever-changing environment, and we needed to be more agile and adaptive. 

It’s important to constantly evaluate your areas of strength and, while not always fun, areas of weakness. The strengths that stood out to us were serving clients and providing financial planning and investment management solutions. We were much less adept at developing state-of-the-art technology and understanding how artificial intelligence might one day enhance our clients’ experiences. Not only did we lack core competency in these areas, but we believed the cost to develop solutions would likely exceed our available budget.

In considering the remainder of our 10-year plan, we felt that quickly addressing those areas in a meaningful way would best position the business, and ultimately our clients, for long-term success. That realization led us to conclude we should consider outside capital as part of our future.

Evaluating Options

The next step was to evaluate larger strategic players in the space, including many companies that had at least 20 to 30 people in both their technology and marketing departments, as well as layers of resources in human and financial capital to provide solutions.

Those assessments reinforced our belief that the scale game was changing rapidly and convinced us we’d be better positioned to achieve our objectives by joining a bigger firm. 

When seeking a buyer, most RIAs need to weigh the decision between private equity and joining a larger firm. Although I have great respect for all the smart private equity players in the industry, we just didn’t think that was the right fit for us because it felt like a short-term solution.

The paramount consideration was how a merger would affect all three stakeholders of our business — clients, employees and owners. We felt strongly that our chosen partner needed to provide the greatest balance of benefits for each group. If you don’t feel your potential partner can benefit these three stakeholders equally, it may be worth reconsidering. 

Facing the Future

In the end, it was very important to prepare for the future. We felt strongly that to best serve our clients, our firm needed to become even more multigenerational than it already was, and we didn’t want that to happen abruptly. 

I just turned 62 and glad we’re doing this now, rather than when I’m 68 and might be gone in six months. That approach wouldn’t have made any sense to me. If we were going to head down this path, we wanted to do it when I, and others my age in the ownership group, could help shape the ultimate result and really be involved with our next generation growing into their roles.

In explaining the merger to clients, they generally understood our reasoning well. There were certainly questions about the firm acquiring us and whether I was happy with the deal, because clients understandably wanted to know whether I’d still be around for a while. Thankfully, all of our owners and employees are excited about the transaction, as well as the additional resources now available to us. 

My final piece of advice? Whenever you think would be an appropriate time to begin seriously considering your succession plan, start sooner than that. The industry is constantly evolving, and it’s incumbent upon all of us to adapt so that we can help our clients be secure in the knowledge of who will serve them not just today or tomorrow, but 20 or 30 years from now.

Mark Griege is chief executive officer and co-founder of RGT Wealth Advisors. Prior to co-founding RGT in 1985, Mark was integrally involved in the tax departments at a Big Five accounting firm as well as a regional law firm.

(Photo: Shutterstock)


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