How RIA Sellers Can Avoid Running Out of Runway

"Time moves slowly, but passes quickly." That famous line from Alice Walker's novel "The Color Purple" applies to many aspects of life and business — and, thanks to recent deal trends, it now carries particular resonance in wealth management M&A.

For the owners of registered investment advisory firms and other advisory practices who are planning to sell their firms, it has been "relatively easy historically to get a good value" in a transaction, said David Grau, the CEO of consulting firm Succession Resource Group.

"I don't think that will be the case going forward, and I think, in another five to 10 years, there will definitely be some practices that, because they were not prepared for sale, they will have a tough time selling or getting a good value,” he said. “They'll have a tough time getting a buyer."

In a webinar Grau led last month on the steps sellers should take to secure a deal within the next three to five years, he explained how the many tasks involved in the process can make those 36 to 60 months seem like a much shorter span of time. Creating internal succession plans typically takes far longer, and the difficulty of completing complicated work related to a firms' data, valuation, client portability and other aspects of the business demonstrates "why three to five years will fly by" for many prospective sellers, Grau said.

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