Should You Sell Your Advisory Practice on Your Own or Hire a Sell-Side Advisor?
Authors Kristen Grau, CPA, CVA, CEPA, Executive Vice President Kristen Grau is the Executive Vice President of Succession Resource Group, where she leads the firm’s Seller Advocacy program. A CPA, CVA, and CEPA with over a decade of experience as a business appraiser and sell-side adviser in financial services, Kristen has helped sell and transition more than 100 advisory businesses ranging from $40 million to $1 billion in AUM. David Grau Jr., MBA, Founder & CEO David Grau Jr. is the founder and CEO of Succession Resource Group, a succession and M&A consulting firm for financial advisors. A published author, U.S. Navy veteran, and one of the industry’s most recognized voices on advisor M&A and next-generation building strategies, David has delivered more than 200 presentations at leading financial services firms nationwide. Parker Finot, Director of Transaction Advisory Services Parker Finot is the Director of Transaction Advisory Services at Succession Resource Group. With 13 years in the financial advisory space, Parker has supported more than 300 transactions and helped facilitate over $40 billion in transferred AUM through succession plans, acquisitions, and strategic partnerships. Ryan Grau, CVA, CBA, Director of Valuations Ryan Grau is the Director of Valuations at Succession Resource Group. He has been consulting with financial advisors on valuation, deal terms, and M&A strategy since 2011 and holds both the Certified Valuation Analyst (CVA) and Certified Business Appraiser (CBA) designations. Ryan’s team completed 316 valuations in the most recent 12-month period. You can sell your advisory practice on your own, but in our team’s experience you will usually leave something on the table: protections, price, terms or all three. That was the message from Episode 33 of the SRG Exchange, where four of SRG’s M&A specialists compared do-it-yourself deals with sales that have an advocate on the seller’s side. Kristen Grau, who leads our Seller Advocacy team, opened the conversation with what most sellers are facing right now: emails and letters promising 10 times valuation, aggregators pitching easy roll-ups, broker-dealers pushing in one direction or another, and the option of simply finding a buyer yourself. Here are the biggest takeaways from the discussion. What goes wrong when advisors sell on their own? Ryan Grau, our Director of Valuations, said the biggest risk he sees has nothing to do with valuation. It is advisors negotiating deals on their own, usually with one or two people from their immediate circle, and taking shortcuts along the way. In those deals, he has seen confidential information shared with no NDA in place, due diligence handled loosely on both sides, and one-page sale agreements. A one-page agreement can work when two advisors are simply splitting revenue, but as Ryan pointed out, a bank will not underwrite to it. Deals get right up to the finish line and then stall while proper contracts are drafted. His comparison: you can sell a house without a realtor, but a good one markets it, brings in interest and coaches you so the house looks show ready instead of lived in. Selling a practice works the same way. Can you rely on your relationship with the buyer? Parker Finot, whose team supports peer-to-peer deals where the buyer and seller have already found each other, cautioned against leaning too hard on the relationship. He has seen pairs that looked like a perfect fit at the start discover by the end that they were not aligned at all, and the seller ended up selling elsewhere. In another deal he described, a fee-only seller’s clients were all on single-year contracts that had to be renewed manually. The seller planned only four to six weeks of client communication, and there was no adjustment clause protecting the buyer. Trust had dulled everyone’s attention to the details. The deal landed in a good place, Parker said, but only after the team built in real transition support and downside protection. Should fit come before price? David Grau Jr., SRG’s founder and CEO, put it simply: fit matters, but it is not the only thing that matters. In his words, “It’s not fit, fit, fit. It’s fit, price, terms, taxes.” If you lock in a great fit but have no one else to negotiate with, you have probably given up ground on everything else. He compared selling to the one peer you trust to hiring a friend’s son or daughter as a receptionist. The trust is real, but until you interview the other candidates, you cannot honestly tell your clients this is the best person for them. And even if you end up with the same buyer, competing offers help both sides feel good about the price. David also noted a shift in what sellers ask for. Fit used to come first; most conversations he hears now lead with price. Kristen explained why fit still cannot drop off the list: many sellers now stay on for two, five or even ten years after the sale, often going from decision maker to employee. A cultural mismatch at that stage, she said, rarely ends well for the seller, the clients or the team. Ryan sees what happens when it goes wrong. When he is brought in as an expert witness on deals that fell apart, the cause is usually contracts, protections and expectations that were never properly worked out, which opens the door to cherry picking clients, fee changes and lost revenue. Why don’t great offers just show up? After more than two decades of advisor deals, David’s view is that strong offers are built, not received: “Good offers will show up unexpectedly. Great offers, which is what you likely want and deserve, those do not.” David Grau Jr., Founder & CEO, SRG He described an offer from a firm with a couple of billion in AUM that looked like one of those rare great ones, until page four or five. The buyer did not have to close unless 95% of clients signed new contracts first. Picture spending weeks telling clients how excited you are about your new partner,
Contingency Planning for Financial Advisors: Who Takes Over If Something Happens to You? (Ep. 37)
Hosts Julia Sexton, CVA, Director of Strategic Organizational Planning Julia Sexton is the Director of Strategic Organizational Planning at Succession Resource Group, where she leads the firm’s compensation design, equity sharing, employment agreement, talent strategy, and contingency planning programs. A CVA since 2019, Julia has completed thousands of valuations and supported more than 200 successful mergers over her eight-plus years in financial advisory consulting. David Grau Jr., MBA, Founder & CEO David Grau Jr. is the founder and CEO of Succession Resource Group, a succession and M&A consulting firm for financial advisors. A published author, U.S. Navy veteran, and one of the industry’s most recognized voices on advisor M&A and next-generation building strategies, David has delivered more than 200 presentations at leading financial services firms nationwide. Parker Finot, Director of Transaction Advisory Services Parker Finot is the Director of Transaction Advisory Services at Succession Resource Group. With 13 years in the financial advisory space, Parker has supported more than 300 transactions and helped facilitate over $40 billion in transferred AUM through succession plans, acquisitions, and strategic partnerships. Kristen Grau, CPA, CVA, CEPA, Executive Vice President Kristen Grau is the Executive Vice President of Succession Resource Group, where she leads the firm’s Seller Advocacy program. A CPA, CVA, and CEPA with over a decade of experience as a business appraiser and sell-side adviser in financial services, Kristen has helped sell and transition more than 100 advisory businesses ranging from $40 million to $1 billion in AUM. Ryan Grau, CVA, CBA, Director of Valuations Ryan Grau is the Director of Valuations at Succession Resource Group. He has been consulting with financial advisors on valuation, deal terms, and M&A strategy since 2011 and holds both the Certified Valuation Analyst (CVA) and Certified Business Appraiser (CBA) designations. Ryan’s team completed 316 valuations in the most recent 12-month period. What Happens to Your Advisory Practice If You Can’t Show Up Tomorrow? Most financial advisors say they have a contingency plan. Far fewer have one in writing. When David Grau Jr. asked a room of 65 to 70 advisors whether they had a contingency plan, about three quarters raised their hands. When he asked who had a written plan on file with their custodian or broker-dealer, the number dropped to less than a third. A contingency plan covers the exit you don’t plan for: death, permanent disability, temporary disability, or even the loss of your license. In this episode of the SRG Exchange, Julia Sexton, who leads SRG’s contingency planning service, is joined by David Grau Jr., Parker Finot, Kristen Grau, and Ryan Grau. Together they explain how a contingency plan differs from a succession plan, walk through the three most common agreement structures, and share what they’ve seen go wrong when a plan is missing or out of date. The panel closes with the practical steps that make a plan work: set a value someone can actually execute when you aren’t there, update the agreement every year, tell your team, partner, and clients that the plan exists, and structure the sale so your estate is taxed at capital gains rates rather than ordinary income. Key Takeaways Contingency planning and succession planning solve different problems. Succession planning is the intentional, multi-year transfer you choose. Contingency planning covers the exit you don’t choose, so your clients, team, and family aren’t left to figure it out. Triggering events go beyond death. Plans typically cover death and permanent disability, and many also address temporary disability and loss of license. Ryan points out that a family emergency, like a spouse’s illness or a child’s accident, can pull you out of the practice too. There are three common structures. A one-way agreement names one buyer for your practice. A reciprocal agreement has two advisors agree to cover each other. A retainer agreement brings in a firm like SRG to find the best buyer at the time of the event, based on priorities you set in advance. A retainer agreement keeps your options open. Kristen notes that a successor you already like can still be part of the buyer pool. Because SRG’s sell-side team is paid based on purchase price, the goal is the best terms for your family, even when a broker-dealer allows as little as 20 days and lenders often need 45 to 60 days to underwrite a loan. Stale agreements create real risk. The panel shared cases of outdated 2x revenue multiples, contingency partners who had retired or passed away, and right of first refusal clauses that blocked a better sale. Review your partner, multiple, and terms every year. A stated multiple is faster than a valuation at the time of the event. Ryan explains that once the data is in hand, a valuation can take anywhere from a week to 30 days, and pulling that data is hard when you aren’t there. A stated multiple tied to a recent valuation, with clear definitions of the revenue or earnings it applies to, can be put to work right away. Use deal terms, not a discount, to handle attrition risk. Ryan recommends valuing the practice at market and letting the deal terms adjust for clients who don’t stay. Julia adds that when a plan is in place, attrition in these deals tends to be low. Tell people the plan exists, and mind the taxes. Share it with your partner, team, custodian or broker-dealer, CPA, attorney, and family. David cautions against revenue-share arrangements, which can turn the sale into ordinary income, and recommends a buy-sell agreement that can qualify for capital gains treatment. Frequently Asked Questions What is contingency planning for financial advisors? Contingency planning is a written plan for what happens to your advisory practice if you can’t serve clients because of an unplanned event, such as death, permanent or temporary disability, or loss of license. It names who takes over, how the practice is valued, and how the purchase price is paid, so your clients, team, and family aren’t left to sort it out. How is a contingency
Valuation Best Practices: The KPIs That Actually Move Your Practice’s Multiple
Authors Ryan Grau, CVA, CBA, Director of Valuations Ryan Grau is the Director of Valuations at Succession Resource Group. He has been consulting with financial advisors on valuation, deal terms, and M&A strategy since 2011 and holds both the Certified Valuation Analyst (CVA) and Certified Business Appraiser (CBA) designations. Ryan’s team completed 316 valuations in the most recent 12-month period. David Grau Jr., MBA, Founder & CEO David Grau Jr. is the founder and CEO of Succession Resource Group, a succession and M&A consulting firm for financial advisors. A published author, U.S. Navy veteran, and one of the industry’s most recognized voices on advisor M&A and next-generation building strategies, David has delivered more than 200 presentations at leading financial services firms nationwide. Your practice’s valuation multiple is set by a handful of key performance indicators, not all 40 that show up in a benchmarking report. Recurring revenue, organic growth, profitability, client age, AUM concentration and key-person dependency move the number. Metrics like return on assets mostly describe the practice. Most of the drivers take two to three years to change, so the time to measure them is well before an offer arrives. That was the core message of SRG’s October webinar, Valuation Best Practices: Stop Leaving Money on the Table, hosted by Ryan Grau, CVA, CBA, and David Grau Jr., MBA. This article walks through what they covered: why your practice has more than one value, which KPIs set your multiple, the mistakes and myths that cost advisors money, and when to get a formal valuation. Why does your advisory practice have more than one value? Value follows cash flow, and cash flow depends on why you need the number and who you assume is buying. The same practice can be worth $846K to an internal successor and $2.5M to an outside buyer. Neither number is wrong. They answer different questions. Purpose comes first. Some valuations are binding: they have to hold up to a lender, a court or the IRS. That includes SBA and bank acquisition loans, divorce, partner disputes, estate and gift tax, and buy-sell agreements that set a price by appraisal. Others are decision-making valuations that inform your next move, such as exit planning, merger pricing, succession planning and year-over-year benchmarking. The buyer comes second. Each buyer type pays for a different stream of cash flow: Buyer What they pay for Typical price Typical terms Internal successor Standalone cash flow, no synergies 7x to 10x EBITDA Fixed price, often bank-financed cash at close Peer buyer Integrated cash flow, with duplicate overhead removed 8x to 10x EBITDA, or 2.5x to 3.5x revenue for smaller books Mostly guaranteed, part tied to client retention PE-backed aggregator Platform-expanded cash flow 9x to 15x EBITDA Often less than 50% cash at close; the rest in earnouts, retention and rolled equity An internal sale usually prices lower because a key employee buying in brings no synergies. A peer down the street can drop a second office, a second receptionist and a second investment manager, so the same revenue produces more cash flow for them. For a deeper look, read why your practice’s value depends on the buyer. How do valuations actually work? Every valuation answers two questions: what does the practice earn, and how confident is a buyer that those earnings continue without you? Earnings are measured as recurring revenue or normalized cash flow. Risk, growth and transferability set the multiple applied to them. Size decides which lens applies. Smaller, owner-centered practices are usually valued on recurring revenue, at roughly 2x to 3.5x. Larger firms with a team and infrastructure are valued on adjusted EBITDA, at roughly 8x to 11x or more. Industry-wide, the average recurring revenue multiple for an RIA sits around 3.27x, inside a range of about 2x to 4.5x. Averages are useful for benchmarking and useless for pricing. As David put it during the webinar, they work like price per square foot in real estate: worth knowing, but you would never buy or sell a home on that number alone. Our guide to how RIA valuations work covers the methods in more detail. Which KPIs actually move your valuation multiple? A small group of value drivers sets your multiple, a second group adjusts the risk, and the rest are fact patterns that tell the story. A typical SRG valuation report benchmarks more than 40 metrics. A low score on recurring revenue changes who you’re compared against. A low score on return on assets won’t move your value. Here is how we sort them: Value drivers (move the multiple) Recurring revenue Revenue growth Profit margin Pricing Client age and AUM concentration Key-person dependency Supporting factors (adjust the risk) Net flows and AUM growth Multi-generational planning Client tenure and contact with top clients Out-of-office meetings Staff headcount No-solicit and no-serve agreements Fact patterns (inform the story) Return on assets Revenue and assets per household Households per advisor Clients under $100K or over $1M Years in the industry, disclosures, CRM and web presence Recurring revenue sets your comparison group Recurring revenue is the biggest risk lever in any advisory practice. When we pull market comparables, we filter by time, size and revenue mix, so your recurring percentage decides which practices you’re measured against. On the high end of the market, revenue multiples reach 5x. On the low end, commission revenue tied up in surrender periods can trade at 0.1x to 0.2x. Non-recurring revenue is harder to value. The average multiple works out to roughly 0.63x, but in practice buyers pay either about 1x, when you can show a consistent track record, or nothing at all for a one-time sale. In one firm we valued, moving recurring revenue from 84% to 90% was the difference between a 2.81x multiple and a multiple above 3x. Organic growth measures what you and your team produce For most advisors, 50% to 60% of growth comes from the market. Buyers want to see what you and your team are producing. We look at two things: Net change
Valuation Best Practices: Stop Leaving Money on the Table
Watch the Replay Please enable JavaScript in your browser to complete this form.Please enable JavaScript in your browser to complete this form.First Name *Last Name *Phone * Work Email * Would you like to join SRG’s newsletter to receive industry updates and other webinar opportunities? Yes No Access Recording Why Does Your Practice Have More Than One Value? Because value follows cash flow, and cash flow depends on why you need the number and who you assume is buying. The same practice can be worth $846K to an internal successor and $2.5M to an outside buyer, so the purpose and the buyer come before any multiple. In this session, Succession Resource Group’s Ryan Grau, CVA, CBA, and David Grau Jr., MBA, show what sets the value of an advisory practice and where owners leave money on the table. Ryan and David walk through how valuations work, from binding purposes like lending, divorce, and estate planning to decision-making ones like exit and succession planning. You will see why internal sales price at 7x to 10x EBITDA while PE and aggregator deals can reach 9x to 15x but often pay less than half in cash at close. Ryan separates the drivers that move your multiple, such as recurring revenue, organic growth, client age, and compensation practices, from fact patterns like return on assets that rarely do, and a side-by-side of two $1M practices shows a $1.2M gap. Advisors planning to exit in the next three to five years, weighing an unsolicited offer, or setting up a buy-sell agreement will find this a practical guide to knowing and growing their number. Hosts Frequently Asked Questions What determines the value of a financial advisory practice? Two questions: what the practice earns, measured as recurring revenue or normalized cash flow, and how confident a buyer is that those earnings continue without you. Risk, growth, and transferability set the multiple. Smaller, owner-centered practices are usually valued at about 2x to 3.5x recurring revenue, while larger firms with a team and infrastructure are valued at about 8x to 11x or more of adjusted EBITDA. Why does my practice have more than one value? The purpose of the valuation and the buyer you assume change the cash flows being valued. An internal successor buys standalone cash flow with no synergies, a peer buyer can remove duplicate overhead, and a PE-backed aggregator prices in platform growth. In one example, the same practice was worth $846K in an internal sale and $2.5M in an external sale. Is the headline multiple the price I will receive? Usually not. A higher headline multiple tends to come with more of the price paid later and tied to future results. PE and aggregator deals often pay less than 50% in cash at close, with the rest in earnouts, retention payments, and rolled equity. Compare cash at close and deal terms, not the announced number. When should I get a formal valuation? Ideally three to five or more years before an exit, because the drivers that matter most take years to move. You also need one before bringing in a partner, when setting up a buy-sell or contingency plan, when an unsolicited offer arrives, for lending, and for estate planning, divorce, or a partner dispute. Refresh it every one to two years to measure progress.
Valuation Best Practices: Stop Leaving Money on the Table
Watch the Replay https://vimeo.com/1233895308 Transcript Ryan Grau: Good afternoon. Thank you, everybody, for taking time to join us today. Looks like we still have quite a few people joining, so we’ll give everybody a second here to get settled. Today we’re going to be talking about valuation best practices, and talking to you about understanding some of the key drivers behind your values, some important factors that you need to know about getting ready to have your practice valued, and also interpreting and understanding the outcomes. All with an emphasis on hopefully helping you to stop leaving money on the table when it is time to consider a transaction. So it looks like we’ve got most people here. Numbers have stopped climbing. We’re going to be launching a poll for you here in just a moment. If you wouldn’t mind answering those questions, we would greatly appreciate it. While you’re doing that, I will be the voice in the background talking to you about Succession Resource Group for those of you who are not familiar with us. Succession Resource Group is a one-stop consulting firm, meaning that we don’t have just a laser focus on one discipline. Rather, we have a team of 23 professionals with diverse backgrounds in various areas of expertise. Your presenters today, David and me, Ryan, have slightly different backgrounds. David really focuses more on sell-side M&A consulting, and really everything that you see here in terms of services, because he founded the company in 2012. So David has a very deep understanding of all of these topics. My area of expertise specifically is valuation and benchmarking. That is what my team focuses on, which is why I’m going to be leading today’s presentation with David. In addition to valuation, Succession Resource Group focuses on other services such as succession planning, exit planning, continuity planning, merging practices together, entity formation, restructuring entities if you’re wanting to switch to a two-tier entity system, employment agreements, and compensation design. So again, we do a lot of things for our clients. All of these things generally have one thing in common, which is transacting on the value of your practice, or maintaining, improving, and protecting the value of your practice. So that’s going to be the key part of what we’re going to be focusing on today. David, hopefully I represented SRG well. Anything that you’d want to add? David Grau Jr.: You said it nicer. I know a little about a lot, and you know a lot about a little, which is the nice part about having a full team here, to Ryan’s point. And if and when we get the chance to work together, or, I recognize some of the names on the registration list here, get a chance to work together again, it’s likely because, to Ryan’s point, we just keep everything under one roof. It’s nice to get some expertise in consulting, which we’ve got in spades with, I would say, not one of the most experienced, probably the most experienced team of consultants in the industry when you look at it by tenure. But also just the alphabet soup down there in the bottom left on the accreditations, right? That gives us the ability to not only talk strategy, understand the industry, and go deep on that, but then we don’t have any external handoffs. We can keep the tax side in-house, the legal side in-house. We would never sell based on being a lower-cost solution. But I will say, because we can control the process end to end, like Ryan said, it gives us the ability to actually deliver things more cost effectively, because you just have less stuff getting dropped and you’ve got fewer handoffs. But no, otherwise, you nailed it. We’ve got a team of really smart people here, one of whom is going to lead the conversation today. And hopefully you all have some questions, because with two of us, we get to moderate and make sure we get your questions answered. Ryan Grau: Perfect. So let’s talk about our agenda and what we are hoping you’ll take away from today’s presentation, because we are going to be hammering these topics home today. First and foremost, your practice has more than one value. I know, mind-blowing for a lot of people. But unlike a house or a car, the valuation of your practice is going to follow cash flows, and those cash flows will be determined by the purpose of your valuation and who you’re selling to. Second, there are a lot of key performance indicators that will have an impact on your value. Some of them are more important than others. Some of them are informational. Some are very macro valuation movers, some are micro. So we’ll talk about those different valuation key performance indicators and put them in perspective. Next, headline valuation multiples are not price. Often people read industry publications about what practices are selling for. They talk to a friend at the bar about what their friend sold their practice for, and this now becomes what my practice would sell for. Well, we need to peel back those multiples and understand what went into that transaction, because price is very easily influenced by deal terms. So a 20 times or 15 times EBITDA multiple is not a cash price. It’s not what you’re going to sell to a key employee for. Next, of the KPIs, there is some pretty low-hanging fruit for a vast majority of practices in this industry that you should be focusing on. A lot of these KPIs take time and tactical decisions, but very little investment. Some of them take a little bit of investment to get them buttoned up, and that can unlock tens, if not hundreds of thousands of dollars in risk mitigation in your practice. And lastly, waiting to have your valuation done until you get to a point that you are considering a transaction, or getting ready
How RIA Sellers Can Avoid Running Out of Runway
By: Tobias Salinger Publishing Date: October 1, 2026 “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.” To read the full article, please visit: https://www.financial-planning.com/news/how-ria-sellers-can-avoid-running-out-of-runway Disclaimer This article was first published by Tobias Salinger The original article can be found here. All rights to the original content are held by FinancialPlanning.com.
Understanding Valuation Outcomes: Why Your Practice’s Value Depends on the Buyer
Author Ryan Grau, CVA, CBA, Director of Valuations Ryan Grau is the Director of Valuations at Succession Resource Group. He has been consulting with financial advisors on valuation, deal terms, and M&A strategy since 2011 and holds both the Certified Valuation Analyst (CVA) and Certified Business Appraiser (CBA) designations. Ryan’s team completed 316 valuations in the most recent 12-month period. The value of an advisory practice depends heavily on who is buying it and how the deal is structured. Internal successors, peer firms, and private equity or aggregator buyers each project different cash flows and pay on different terms, so the same practice can support very different prices without anyone getting the math wrong. This article explains why the value of a practice can differ, sometimes materially, depending on the buyer assumed and the structure of the transaction. A value calculated under the Income Approach, based on a firm’s forward distributable cash flow as currently structured, will frequently differ from pricing observed in market transactions for comparable practices. Here is why. Why Does the Same Practice Get Valued Differently? Differing views of value are rarely due to disagreements over valuation methodology, understanding of current market conditions, or multiples. Divergent views on value and valuation typically stem from the assumed buyer. Different buyers, not individuals, but different buyer archetypes (internal successors, external peers, aggregators and private equity), have different cash flows, use different terms, and have different levels of control and different abilities to influence outcomes. Two terms come up throughout this article. The Income Approach values a business based on the present value of the cash flow it is expected to produce. A market approach values it based on what buyers have paid for comparable practices. Market multiples already reflect the synergies buyers bring to a deal, which is one reason the two approaches can land in different places. As Ryan Grau explained on SRG’s April 2026 webinar on mergers: “A market approach inherently in the data is going to have synergies built into those market multiples.” Ryan Grau, CVA, CBA The sections below walk through how each buyer archetype builds its view of value. For a broader look at what drives your number, see How RIA Valuations Work. How Do Internal Successors Value a Practice? Internal succession typically values the firm assuming it continues to operate largely as it does today. While valuation is forward-looking, the forecast is anchored to the firm’s demonstrated performance, current staffing model, compensation structure, and service offering. This cash flow framework can be summarized as: Projected Revenue − Operating Expenses − Market-Based Owner Compensation = Projected Normalized EBITDA − Required Reinvestment = Forward Distributable Cash Flow The internal buyer is focused on the present value of future available cash flow under the current business model. The forecast incorporates expected organic growth, client retention, and operational efficiencies achievable within the firm’s existing scale and infrastructure, without assuming transformative changes in capital access, service breadth, or integration into a larger enterprise. The internal value therefore lacks any potential synergistic effects seen with outside buyers when the firm is consolidated. In the hierarchy of transaction outcomes, internal succession will typically produce the lowest value, driven purely by economics. For many owners, that trade-off is worth it for continuity and control, and a well-designed succession plan can close part of the gap. For more on this path, read Executing a Successful Internal Succession Plan in the Private Equity Era. Why Do Peer Buyers Usually Pay More Than Internal Successors? In a transaction between independent advisory firms, the buyer typically acquires control and integrates the seller’s business, or the relevant parts of it, into its operating platform. The buyer underwrites not only the seller’s standalone cash flow, but also the incremental cash flow created by combining two operating businesses, eliminating redundant costs, and scaling fixed infrastructure across a larger revenue base. A simplified framework may be expressed as: Projected Standalone EBITDA − Eliminated Duplicative Overhead + Platform Revenue Expansion (for example, a higher grid payout) = Integrated EBITDA The key driver is operational integration synergy. By consolidating overlapping infrastructure, the buyer can eliminate duplicative costs, including technology, back office and administration, compliance, and certain owner functions that can be replaced with lower-cost salaried roles, and spread fixed expenses across a larger revenue base. Because these savings are typically identifiable before closing and largely within the buyer’s control to execute, peer transactions often support higher pricing than internal transitions, where value is based primarily on standalone distributable cash flow. How Do Private Equity Firms and Aggregators Value a Practice? Private equity and aggregator buyers often underwrite a different cash flow profile. Similar to peer transactions, they may realize integration efficiencies through consolidation. In addition, platforms frequently assume incremental revenue capacity tied to scale, brand, capital support, and expanded service breadth. These models often also assume the founder remains employed and continues to be compensated post-transaction. A simplified framework may be expressed as: Projected Standalone EBITDA + Expanded Service Capabilities + Increased Wallet Share from Existing Clients + Platform-Supported Pipeline Conversion − Eliminated Duplicative Overhead − Ongoing Founder Compensation at 20% to 25% of Revenue = Platform-Adjusted EBITDA This type of transaction not only integrates the seller’s firm but also positions it within a larger enterprise offering expanded investment options, family office services, tax capabilities, estate planning, comprehensive financial planning, insurance products, marketing engines, and capital support. These expanded assumptions depend not only on the platform’s capabilities, but also on the continued involvement of the selling principals and the achievement of specified performance metrics. Pricing in these transactions exceeds internal or peer sale values because the buyer underwrites platform-enabled revenue expansion and shares future risk with the seller. Why Can a Higher Headline Multiple Be Misleading? In a sale to a private equity or aggregator buyer, the seller may be monetizing both current earnings and a portion of assumed platform-enabled upside. A significant part of the difference in observed headline value is often driven by deal structure. Unlike many peer
Why Every Financial Advisor Needs Annual Entity Maintenance
Authors Annual entity maintenance is the difference between a business structure that protects you and one that quietly exposes you to personal liability, IRS scrutiny, and deal-killing complications. Most financial advisors set up an LLC or S-Corp when they launch their practice, file the paperwork, and never look at it again. That gap between formation and ongoing upkeep is where the real risk lives. If you own an RIA or operate under a broker-dealer with your own entity, the structure you created on day one does not stay current on its own. State filing requirements change. Ownership shifts happen. Revenue flow documentation falls out of date. Operating agreements stop reflecting how the business actually runs. And when it comes time to bring on a partner, sell your practice, or defend your setup in an audit, a neglected entity can cost you far more than it would have cost to maintain. This article walks through what annual entity maintenance involves for financial advisors, why the industry has unique requirements that generic small-business guidance does not cover, and what a practical maintenance routine looks like. What Is Annual Entity Maintenance for Financial Advisors? Annual entity maintenance is the process of reviewing and updating the legal, financial, and operational components of your business entity on a recurring basis. For most small businesses, this means filing an annual report with the state and keeping licenses current. For financial advisors, it means considerably more. Financial advisory firms operate under regulatory constraints that most businesses do not face. If you hold securities licenses under FINRA Rule 2040, your broker-dealer pays you personally regardless of whether you have a business entity. If you elected S-Corp tax status, the IRS requires you to pay yourself a reasonable W-2 salary and maintain specific documentation around how revenue moves from your personal accounts into the entity. If you have business partners, your operating agreement needs to reflect current ownership percentages, voting rights, and buy-sell terms. Annual entity maintenance addresses all of these layers: state compliance, IRS documentation, governance updates, financial reconciliation, and strategic readiness. It is the ongoing work that keeps your entity doing what you set it up to do. Why Do So Many Advisory Firms Skip Entity Maintenance? The most common reason is that nobody told them it was necessary. Many advisors form an entity with help from a local attorney or online filing service, receive their articles of organization, open a business bank account, and assume the work is done. The entity exists on paper, so it must be working. This is especially common with single-owner firms. When you are the only decision-maker, the formality of annual resolutions, meeting minutes, and ownership ledger updates can feel unnecessary. There is no partner to negotiate with, no equity to divide, and no one asking to see your governance documents. The problem is that neglected entities accumulate risk quietly. A missed annual report filing can result in administrative dissolution. Outdated governance documents can block a transaction months or years later. Revenue flow arrangements that were set up correctly at formation can fall out of compliance if business circumstances change and the documentation does not keep pace. In SRG’s experience working with hundreds of advisory firms nationwide, the majority of advisors who come to us with an existing entity have significant gaps in their documentation and compliance. For some, they filed with the state, received their articles, opened a bank account, and moved on. For others, a local attorney filed the entity and provided simple governance documents. In either case, the critical steps remain incomplete. What Happens When Your Entity Falls Out of Compliance? The consequences of neglected entity maintenance vary in severity, but they tend to surface at the worst possible time: when you are trying to complete a transaction, defend yourself in an audit, or navigate a partnership dispute. Personal Liability Exposure One of the primary reasons advisors form an entity is to separate personal assets from business liabilities. That separation depends on what attorneys call “maintaining the corporate veil.” If you commingle personal and business finances, fail to keep proper records, or let your entity lapse with the state, a court can “pierce the veil” and hold you personally liable for business obligations. This means your personal assets, including your home, savings, and investment accounts, could be at risk. Nicole Frey, CFP®, SRG’s entity support lead, emphasizes this point with clients: the entity creates a wall between your personal and professional life, but that wall requires maintenance. If you are not keeping company and personal affairs separate, including using distinct bank accounts for personal income, entity operations, and profit distributions, you may be undermining the very protection you set the entity up to provide. IRS Audit Risk and Revenue Flow Issues Financial advisors face a unique IRS challenge that most business owners never encounter. Because broker-dealers and corporate RIAs pay licensed professionals directly under FINRA Rule 2040, advisors must move that income from their personal tax return to the entity’s tax return. The IRS has historically challenged this arrangement under what is known as the “fruit and tree doctrine,” which holds that taxes must be paid by the person or entity that controls the source of the income. The 2016 Tax Court case Fleischer v. Commissioner illustrates the risk. A Nebraska-based financial advisor working under an independent broker-dealer set up an S-Corporation and assigned his payments to it. The IRS challenged the arrangement, and the Tax Court agreed, resulting in over $40,000 in taxes, penalties, and interest. The court outlined specific deficiencies in Fleischer’s setup, all of which could have been addressed with proper documentation and ongoing compliance. To satisfy the IRS that your entity is the legitimate source of income, three factors need to be in place and documented: control over the revenue (demonstrating that no single owner has sole control over how income is handled), a contractual obligation to move revenue from your personal account to the entity, and a reasonable W-2 salary if an
Selling in the Next 3-5 Years? What You Need to Do Starting Now
Watch the Replay Please enable JavaScript in your browser to complete this form.Please enable JavaScript in your browser to complete this form.First Name *Last Name *Phone * Work Email * Would you like to join SRG's newsletter to receive industry updates and other webinar opportunities? Yes No Access Recording How Do You Prepare to Sell Your Advisory Firm in the Next 3-5 Years? Start at least three to five years out. Buyers pay for clean financials, sustainable organic growth, a team that runs the business without you, and signed agreements, and each of those takes years to build. In this session, Succession Resource Group’s David Grau Jr., MBA, shows how to raise your value and choose the exit path that fits your goals. David walks advisory firm owners through what actually drives value and how little time three to five years really is. You will see why the window is short (clean financials alone take three-plus years, and the transaction itself can eat a year), and how to read the two valuation lenses without blending them: books under roughly $200M AUM price on recurring revenue at about 3.27x, while larger businesses price on EBITDA in a 6 to 14x range that averages near 10x, and at a 30% margin both lenses land on the same number. He maps the four variables that set your real options (practice size, timeline, buyer universe, and long-term priorities), the buyer types from peers to internal successors to PE-backed aggregators to direct private equity, and why the highest headline number (a PE deal paid 40% cash, 30% earnout tied to 10-20% growth, and 30% acquirer equity) is rarely the best deal. He closes on the value drivers and red flags buyers won’t name out loud, the internal and external exit paths, and the five things today’s sellers wish they had started earlier. Advisors planning to exit in the next three to ten years, weighing an unsolicited offer, or wanting to raise their firm’s value before they sell will find this a practical, data-backed roadmap. Host Frequently Asked Questions How long does it take to prepare to sell an advisory practice? At least three to five years. Clean financial history alone takes three-plus years to build, and the sale and transition can take another year or more. What is an advisory practice worth? Books under ~$200M AUM are priced on recurring revenue (2025 average 3.27x); larger businesses are priced on EBITDA (6 to 14x, averaging ~10x). At a 30% profit margin, both lenses reach the same number. Who buys advisory practices? Peers and third-party buyers, internal successors, PE-backed aggregators, and direct private equity. More enterprise value means more buyers competing and better terms. What lowers a practice’s value? Client concentration, founder dependency, commingled financials, an aging client base, long-term obligations like leases, and unsigned team agreements.
Selling in the Next 3-5 Years? What You Need to Do Starting Now
Watch the Replay Transcript David Grau Jr.: Alright, good afternoon, everyone. Give everyone just a second here. I can never tell if Zoom automatically admits all of you, or if I can actually watch the counter tick up as it admits you one or two at a time. So we’ll give it a second so you don’t miss anything and you’re in the right place. We are focused today on preparing your business to be sold, generically, in the next three to five years. That’s the subject you saw in the invitation email and on the website: build it like you’ll sell it. Because at the end of the day, you’re going to sell your business. You’re going to leave the industry at some point, horizontally or vertically. You and I both know it’s coming. So let’s make sure we can control that process, with a goal of, say, three to five years. If you have a year or two, or you’re getting ready to list with us and want to be done in the next six months, I suspect you’ll still get a couple of good takeaways. They may not all be as broadly applicable, but you’ll still come away with ideas on how to improve the value of your business, or not just the value, but your overall outcome, so you make informed decisions and feel comfortable. Because you’re only going to do this once if you do it right. Our agenda today is to make sure you’re more prepared whenever you decide to sell. Hopefully we get the opportunity and would be honored to guide that process. But whether you do it yourself, five years out, ten years out, or five months out, we want to make sure you have good information, resources, and strategies, so it’s as enjoyable and stress-free as possible. A little housekeeping. Since you’re all registered, I hope you know who Succession Resource Group is. If you don’t and you registered anyway, thanks for taking a flyer on this. Here’s the 30-second version. We’re a consulting and coaching organization, you can pick the label, because we do both. Whether you’re buying, selling, building a more valuable enterprise, or equity sharing with key team members, if it impacts the value of your business, sharing it, growing it, merging it, that’s what we do. You’ll see our core services on the right, everything from valuation to sell-side representation when you’re ready to retire, and everything in between. There’s a lot of room between those goalposts, I acknowledge. We’ve been doing this a while. I’ve been at it since the early 2000s and started Succession Resource Group in 2012. We should probably update this slide, I think we’re at 25 or 26 full-time employees now. The point is, we have a decent-sized team of really smart people. This is not a bunch of admins and attorneys, these are consultants and experts. And you’ll see the alphabet soup of credentials down here. The work we do, valuing, buying, selling, and building more valuable businesses, requires a handful of disciplines. It’s great to have a coach or consultant who knows the industry, and there aren’t many of those, and they mostly all work here, which is why our average consultant tenure is 12, pushing 13 years. But after the consulting and coaching, you have to do the contracts. Once the contracts are prepared, they go to the CPA for tax strategy. Here’s what happens otherwise: you come up with a great strategy with your coach, take it to your attorney to write up, and it’s the first time they’ve written that strategy, so it’s close but not perfect. They ship it to the CPA, who gives feedback to optimize the taxes. It goes back to the attorney, who tweaks it. Then back to the original coach, who says, this isn’t quite what I designed. The rigmarole goes back and forth, and eventually you get some semblance of the original goal, but you’ve spent tens of thousands of dollars to create the 1.0 version. The benefit with us is we control that process end to end. Incidentally, it ends up cheaper in most cases, mostly because we know the strategies. We’ve done this a hundred times, so we give you those documents as a baseline and refine from there. That’s us in a nutshell. All we do is work with independent advisors like you. A few more housekeeping items. Let me hit the agenda so you know what’s coming. Number one, what your practice is worth today: different valuation lenses based on the size of your firm. That sets the table. Number two builds on it: how do you maximize your value, the drivers buyers actually pay for. Tangible levers you can pull, relevant to your size firm, not things you can’t change, like the age of your clients. And then some red flags that could cost you, which buyers won’t always tell you about, because what costs you is good for them. Then we land the plane with the big one: how do you get your value out of the business? If we start too late or don’t have a good monetization strategy, we could have built an amazingly valuable business and still end up selling at a discount, just because we didn’t have enough time. Fourth, I want to make sure you know how we can help. What I’m sharing today, the strategies and the data on the next couple of slides, is either wisdom of the crowd or pulled directly from actual transaction data. On occasion I’ll weave in my opinion, but I’ll flag it. Then we’ll get to your questions. Feel free to use the Q&A panel; we have a moderator watching it, and I’ll save time at the end. There’s a quick poll popping up right now, it helps us bring you better content on future webinars and after this session. The slides are available on request, we don’t blast them out, but