UHNW Investor Interested in Rolling Up RIA Firms
Hi everyone,
I'm interested in pursuing a roll-up strategy in the RIA space.
Long story short- I come from a UHNW family, so I have the liquidity to pursue this.
What inspired me- Some friends of mine started rolling up a number of dental practices casually about a decade ago and have just sold the group to PE for several hundred million dollars.
-This made me realize that I am in the wrong business and I need to enter the private equity game if I ever want to make that kind of money.
My career experience is in RIA space (I manage about $300M for family/friends/pensions), and after 10 yrs in the business I pretty much know the day to day inside out and am ready to scale up the practice through acquisitions- buying up and consolidating/optimizing RIA's - with the goal of eventually selling the entire group.
Give that we are in a period of great wealth transfer in the industry, with many advisors wanting to retire/sell their practices, billions of AUM are for grabs. So the headwinds appear to be favorable for a consolidator like me.
My Questions are:
Would PE firms/Other investors be interested in buying an RIA rollup? If so which kind?
What would be the multiple on revenue they'd pay?
What books/Articles should I read on roll ups? In this space &generally
Who should I speak to? Examples of Who has done this?
What else should I be thinking about?
General roadmap of a rollup strategy?
There are a number of private RIAs (some PE-backed) who are doing rollups and actively acquiring advisors. Mercer (backed by Genstar and I forget who else), Cresset, Focus Financial is a public RIA roll up, Evoke Wealth, IEQ Capital (backed by Stone Point) come to mind. United Capital was doing it and sold itself to Goldman a while back. I’m sure there are others.
It’s not a novel/new strategy. You will have to consider what would make an advisor want to join you vs. an established platform. Most are risk averse and it’s a much easier sell to attach themselves to a big RIA than a startup with a dream. Respect to you for managing real money but $300m is really small potatoes in the RIA business - the books being acquired are generally $500m+ and advisors are being approached with offers from firms that have many multiples of that with systems they can plug in to to grow faster in the future.
Good answer. OP, I think you'll find that this is a pretty competitive space and good advisors will have plenty of offers to buy them out, usually at institutional-quality platforms that can do it better. You may find a niche with really small advisors, but you will need to figure out a differentiator if you want to scale.
Agreed- we will definitely invest in building a differentiated brand and platform. Themes will be High Tech, High Touch, High Payout. Low Maintenance.
Right - I have cash to invest in building the business/ brand + enough to make a few competitive acquisition’s to start us out. Given that I’m in the industry I have a Rolodex as well.
What I’d like to understand is the “flip” part. Who is actually interested in buying a private RIA aggregator?
If I’m able to prove successful at the consolidations /What’s the end game? Who can we sell to? What are the multiples?
I work for a fairly large, single-team RIA/MFO and I just don't see what the end game of these large roll-up groups ends up being. We're approached weekly and everyone has the same pitch. At a certain point these firms become just the same thing as a BB firm where you're complianced to death and restricted on actually helping clients (have heard this from numerous people who sold to the mega RIAs). The end goal for a Mercer is probably an IPO, which I think is just dumb to be apart of. I do agree plenty of firms/advisors will be looking to sell but as mentioned above plenty of others will be willing to buy them (and have been for a decade) out so there isn't actually any unique offering you'd likely be able to contribute, no offense. The exit is what matters for making yourself money and I just don't see what it is as someone inside the sub-industry.
Sunt id praesentium qui iusto error. Quam maiores et numquam magnam officia.
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