While the multiples are real, they typically only apply to practices that align with what buyers are actually seeking. Your firm’s ability to achieve these multiples may be based on the details of your growth, revenue quality, service offering, client base, team, technology and how the deal is structured.
Here’s what buyers are actually looking for.
Sustainable organic growth
One of the most significant drivers in a firm’s value is its ability to deliver sustainable organic growth, as opposed to growth primarily driven by acquisition or market appreciation. Buyers are often willing to pay a premium for practices that consistently bring on new assets from referrals, marketing and existing client relationships.
Strong organic growth indicates high levels of client satisfaction, repeatable processes and a business that isn’t overly dependent on the founder’s personal relationships. Each incremental point of reliable organic growth can meaningfully increase the multiple because it reduces the buyer’s risk while increasing the potential upside of the relationship.
High-quality recurring revenue
Buyers are looking for predictability. Firms that generate consistent, AUM-based fees are typically more attractive than firms that depend on transactional or commission-based revenue.
Buyers also consider the durability of that revenue. Are the fees sticky? Will the revenue stream remain intact post transaction? Firms with high recurring fee revenue and low volatility in those fees typically achieve higher multiples than firms with less consistent revenue.
Comprehensive, planning-led advice
Buyers may also place greater value on firms that offer comprehensive wealth management grounded in financial planning. A practice equipped to address clients’ broader needs, such as retirement, tax, estate and risk-management considerations, may be more differentiated and better positioned to deepen relationships over time.
Compared with a firm focused primarily on investment management or a single service, a more complete offering can support stronger client retention, broader revenue opportunities and greater continuity across generations. Those qualities may help contribute to a premium valuation.
Diverse client demographics
Serving a diverse client base is one of the strongest ways to build a more valuable practice. A practice heavy with clients in the same life stage may be at a higher risk of significant attrition due to mortality or asset transfer to heirs or competitors.
In contrast, having a diverse mix of clients across multiple ages and generations helps spread out natural life-cycle events, resulting in smoother, more predictable cash flows, which are greatly valued by buyers.
Team depth
Buyers want to ensure the talent that built your firm will remain post-transaction. They’re looking for upcoming leaders, next-generation advisors, training and professional growth opportunities, established succession plans, and a depth of support staff and client service teams.
Practices with documented processes, genuine bench strength and clear leadership pipelines signal a lower employee attrition risk, which can result in a higher multiple.
Mature technology and operational scalability
Established, integrated tech stacks signal lower operational risk, the potential for better margins and an easier post-transaction integration. Buyers are looking for integration across a practice’s CRM, portfolio management, compliance, reporting, client portals, automation and trading platforms.
Outdated or heavily manual systems raise red flags around scalability, cybersecurity, and the cost and effort of integrating the practice into the buyer’s platform.
What this means for your practice
Whether your succession timeframe is two years or 10, strengthening these fundamentals can help improve your operations, optimize revenue and, ultimately, put you in a position to command better multiples.
Focusing on organic growth initiatives, establishing recurring revenue, building a comprehensive offering, diversifying your client base, supporting next-generation talent and investing in a modern, integrated tech stack are important steps that can help optimize your practice.
This article is provided for informational purposes only and reflects general observations about advisor development and firm culture. The observations expressed herein are based on Mariner’s perspective and approach to advisor development. Business outcomes, including practice growth, operational efficiency and firm value, depend on numerous factors and will vary among advisors. No specific results are guaranteed.
Mariner is the marketing name for the financial services businesses of Mariner Wealth Advisors, LLC and its subsidiaries. Investment advisory services are provided through the brands Mariner Wealth, Mariner Independent, Mariner Institutional, Mariner Ultra, and Mariner Workplace, each of which is a business name of the registered investment advisory entities of Mariner. For additional information about each of the registered investment advisory entities of Mariner, including fees and services, please contact Mariner or refer to each entity’s Form ADV Part 2A, which is available on the Investment Adviser Public Disclosure website. Registration of an investment adviser does not imply a certain level of skill or training.
