The dry powder is still pouring in for wealth management M&A. While many private equity firms are fully invested – and perhaps taking time to digest – the wealth management arena keeps attracting new capital-provider entrants.
If you are thinking of selling your advisory business, you have much to consider. Buyers can be very differentiated in terms of their time and experience in wealth management M&A, their desired outcomes for the transaction, their expectations of the seller and what they can provide besides financing.
As a seller, you are also unique in terms of vision and purpose for the sale, timeline to sale, business models, culture and brand, and many other personal and workplace aspects. A little homework now to determine your needs a few years down the road can lead to dramatically better results for you, your clients and your team.
In this review of the wealth management M&A space for the first quarter of 2025, I explore what sellers need to know with Bomy Hagopian, Partner at Berkshire Global Advisors; Jeff Nash, CEO and Co-Founder of Bridgemark Strategies; Pat McHugh, Managing Director, Head of Investments at Constellation Wealth Capital; and Michael Longley, Chief Growth Officer at Sanctuary Wealth.
Buyers Aren’t Standardized
Active buyers in wealth management aren’t standardized. There are several types of buyers active in the wealth management M&A space.
Nash points out that “there’s clear stratification among buyers.” He says that mature buyers with established histories are more selective and use more refined criteria, while newer entrants are less selective and more opportunistic, due to their eagerness to enter the market.
Hagopian sees several types of strategic buyers in the space: “The most common buyer type has a fully integrated model with a single brand. A subset is the full conformity buyer with conformity on investment management. Another subset has modified open architecture with some flexibility on investment processes.”
Hagopian says that another buyer type operates through multiple brands. It has “local investment management and operational autonomy with some centralized back-office functions and technology.”
What Buyers Seek
Hagopian explains that the fully integrated buyers look for sellers that are led by financial planning rather than investment management. The full conformity buyer will look for sellers with pure open architecture, while the modified open architecture buyer will allow for sellers that individually select securities.
Buyers favor ensemble-style firms that lead with financial planning, demonstrate a strong growth record, and have next-generation advisors in place,” says Nash. “While some new entrants will acquire to gain a foothold, firms with client-centric models and scalable structures command premium valuations.”
Preparing For Sale
Nash adds, “Sellers should build firms that don’t ‘need’ to sell.” He explains that to prepare itself for a sale, a firm should own its client base, contain multiple advisors for continuity, use standardize portfolios for financial planning, and demonstrate consistent growth and profitability.
Hagopian emphasizes: “A strong cultural fit is critical.” She adds that for firms without strong financial planning capabilities, the willingness to embrace a financial planning-led approach using the buyer’s resources could create growth opportunities and client retention.
Hagopian adds other points of practical advice for sellers, including reaching shareholder consensus on the sale’s objectives, criteria and timing; preparing books and records for due diligence; and retaining a specialist investment bank and legal support.
Nash cautions sellers to “avoid cutting too deeply just to boost margins. Buyers notice when key staff or services are missing and will factor in additional costs to restore them. Sustainable profitability and operational strength are more attractive than artificially inflated short-term profits.”
When Time Is Short
At times, sellers who believed they had many years of runway may find circumstances shorten their expected timeframe.
When time is short, Nash says the seller should hire a professional to guide them through the process. “One year is workable to prepare, market, and close a deal. Two to three years allows more time to optimize business structure and maximize valuation, but isn’t always necessary.”
He cautions against very short timeframes: “Sellers hoping to close in under six months should adjust expectations unless facing urgent circumstances like health concerns.”
Hagopian says that sellers with one to three years to prepare should “focus on high client retention and accelerate organic growth but avoid making material business investments where the returns may not be realized for a few years or may be redundant in a transaction.”
If a seller has longer than three years, Hagopian also recommends a focus on client retention and organic growth, but advises the seller to “invest in more talent and areas that will accelerate growth.”
Attracting Private Equity
Buyers come in multiple forms, but private equity deals are very common, either with a direct buyer or indirectly through a private equity-supported buyer. McHugh says, “Choosing the right partner is about more than just capital — it’s about finding a firm that aligns with your growth vision and adds real value.”
He advises RIAs seeking private equity partners to “prioritize alignment over just valuation, as the market is relatively efficient.”
To determine whether a seller is aligned with a potential buyer, he says the seller should understand the private equity firm’s time horizon and definition of success, which may be organic growth, M&A or operational enhancements, as well as its post-closing role, which may include operational expertise, capital for acquisitions or strategic guidance.
McHugh adds that sellers should “conduct thorough diligence by speaking with executives from their previous investments, especially in wealth management. Their firsthand experiences can reveal how the firm operates beyond the pitch.”
Minority Stakes
Another route a seller may take is seeking a minority stake investment. For this, Longley says that the financials of a transaction aren’t as important as cultural fit.
According to Longley, a seller will want to understand how their role and their team’s role will change after the investment, as well as how their brand will be additive, as opposed to discontinuing the brand. He says that entire teams – and not just shareholders – should be part of the conversation and spend time together, both in business and casual settings.
He adds: “Culture is a misunderstood term and is often taken for granted. Culture not only pertains to the ‘attitude’ of the office but also to how roles and responsibilities fall amongst the teams as they come together.”
For a seller, Longley says that the difference between winning or losing a deal may hinge on what the team receives beyond the capital invested, such as improved personal skill sets, investment solutions, technology platforms, or enhanced infrastructure, scale and capacity.
He also points to alignment on strategic goals. For example, one party may view the capital infusion as prelude to a succession event while the other expects the capital to be deployed for growth. Firms must also agree on the seller’s business model going forward before closing the deal.
Larry Roth is CEO of Wealth Solutions Report and Founder and Managing Partner of Ascentix Partners.
