An alliance of six RIAs called aRIA and managing over $20 billion in assets has written a series of white papers that show advisors how to value their firms for succession or acquisition.
The third and newest part of the series shows how independent RIAs are valued higher than independent broker-dealers and cautions RIAs not to fall into the pitfalls that more high profile deals can experience.
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The think-tank study group also shows how RIAs can grow the values of their businesses based on cash flow, organic growth, and risk.
The group says there are multiple variables that get overlooked when RIAs consider selling their firms.
These gaps can cause advisors to think their businesses are worth more than they really are.
The paper examines size of firm, various valuation models, and best practices around key value drivers.
High profile deals with large valuations also create false hope in advisors that their businesses will also command such lofty prices.
The paper helps advisors be more realistic about what their businesses could actually be worth
and offers guidelines on how to build value so that more realistic succession and exit plans can be achieved.
You can download a copy of the latest white paper here
along with other aRIA information.