Aaron Wells, CVA, Director of Valuations for FP Transitions, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss why it is essential for advisors to understand the valuation of their firm.
FP Transitions provides valuation services and mergers and acquisitions (M&A) consulting to RIAs and financial advisors. The firm offers a suite of benchmarking services using a database of 15,000 independent financial practice valuations and information on 2,000 completed transactions. Wells notes that the larger the firm grows, the more critical the valuation becomes.
Valuing a firm is helpful whether the intent is to sell the firm to an external buyer, to value equity for internal sale to colleagues, or to understand the drivers of valuation to maximize the firm’s value. Transition consulting for RIAs and financial advisors may start several years before the firm’s sale, as optimizing the firm’s operations can lead to a higher valuation when the sale occurs. One way to increase the value of an advisory firm is to build multigenerational relationships with client families.