With strong market demand for wealth advisory firms continuing into 2025, now may be an opportune time for some owners to consider a sale of their business. Valuations of wealth management firms have nearly doubled in the past ten years and 2024 saw record-breaking prices for sellers. Increased interest from private equity-backed firms and other strategic buyers is expected to keep merger and acquisition (M&A) activity high. With a wide range of options available, it is essential to identify priorities for a partnership.
When considering the sale of their business, wealth advisory firm owners often focus on maximizing valuation and closing the transaction efficiently. But often the personal and emotional considerations will be just as important to a successful deal.
The real challenge for owners is figuring out how to maximize value, maintain the legacy they’ve built, and ensure that employees and clients are well cared for. Having a long-term, strategic plan in place – well before a transaction – can give owners greater control and peace of mind, but that means starting early and leaning on expert guidance – which can help improve valuation, avoid common pitfalls, and ensure a smoother transition.
Navigating the personal and emotional complexities of a sale
For many owners, selling a business is about more than financials and logistics, there are personal and emotional concerns that can impact the transaction. Many clients feel like extended family, having trusted the firm for decades, while staff loyalty and team culture also weigh heavily on owners’ minds. Nearly 75% of advisors indicated that the emotional aspects of transitioning clients is one of the biggest succession planning challenges.1
Ensuring clients are well cared for during and after the transition is critical and evaluating a buyer’s approach to client relationships should be a part of the partnership decision making process. Key questions include:
- Will clients continue to work with a trusted advisor?
- Will service quality remain high?
- Will fees stay consistent?
- How much disruption will the transition cause?
Non-owner employees are another top priority. Owners often want to ensure that productive employees are retained, compensated fairly, and given growth opportunities under the new structure. Understanding how a buyer treats employees should be part of your evaluation criteria.
Rewarding and retaining the team through the transition
To help ensure an owner’s own peace of mind, here are three strategies to ensure a firm’s employees feel valued and supported through the M&A process:
- Allocating a percent of the sale: Directing a portion of the sale proceeds to key employees can recognize the team that helped build the firm’s value – and offer the owner some personal satisfaction of honoring their loyalty.
- Earnout bonuses: The majority of investment advisory deals include earnouts, where additional compensation is based on post-sale performance. Structuring these bonuses for employees can motivate them and create alignment with future success. Terms of a deal can include financial incentives for second-generation talent, like transaction bonuses with deferred compensation or a stake in the buyer’s future profits.
- Equity awards in the new entity: Including equity incentives for key employees not only rewards them but also encourages long-term retention and engagement with the new firm.
When to start planning your exit
The best time to begin planning an exit is well before ownership is ready to sell. In fact, the right time to start thinking about this is now. One of the most common mistakes owners make is waiting too long. Delaying transition planning can disrupt retirement timelines, limit options, and reduce the firm’s value. Completing a deal from start to close is an extensive process that can span several months to a year.
Proactive planning helps maximize value, support the team and clients, and preserve a legacy. It allows an owner to exit on their terms – with confidence that the future of the firm, its clients, and its employees are in good hands.
