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Value Creation Blog

4 Ways Of Increasing The Value Of Your Wealth Management Firm

Posted by Josh Patrick

Wealth management firmOne of the businesses that I operate is what I call rent a “C”.  Whether this is a chief operating officer, chief marketing officer or chief financial officer depends on the needs of the Client.  In the wealth management space I’ve played the role of rent a chief executive officer most of the time.  I’ve spent a significant amount of time thinking and working on increasing the enterprise value of the firms I work with.

Many firms can increase their value by changing a few simple things.  Many firms pay attention only to getting new Clients and investing their money.  Those that concentrate on the points below will be rewarded handsomely.

Concentrate on recurring revenue streams.  Buyers want to know the cash flow you create will happen every year.  Working on one-shot deals is nice, but a buyer will pay you much more for recurring revenue.  This is why asset based wealth management firms sell for higher multiples than commission based firms.

Develop an ensemble practice.  With an ensemble practice a business is being sold.  If you have a solo practice, much of the business could be based on a personal expertise.  You must become irrelevant in the day-to-day operations of your business to increase the enterprise valuation in your firm.

Run your business like a business.  Most wealth management firms I see don’t have strong business practices or systems.  Strong business practices show a potential buyer that you not only have good technical expertise but know how to run a business.  Running a business with great organizational skills allows you to grow a larger firm with less people.

Have a proven marketing system that is in writing.  We all market and work to attract new customers.  Having a system that regularly produces new clients will make your business more attractive to a potential buyer.

A wealth management firm that bills on asset values is almost guaranteed to have increased revenues because of market movements.  This makes this industry very attractive to potential buyers.

The old saw of five times earnings is not applicable in this industry.  If your firm is well run and has put the four things mentioned above in place, your multiple should be much higher. 

As always, I’m interested in hearing about success stories from others.  If you have one, please let me know.  You can contact me at Jpatrick@stage2planning.com or click here to set a time for us to talk.

Josh Patrick

I’ve put together a Stage 3 Exit Readiness Report I would like you to have.  This personalized and complimentary report will help you understand the strong and weak points in your company.  To get this report click on the button below.



Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only.  Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered.  Therefore, a response to a request for information may be delayed.  Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: wealth management, enterprise value, for advisors

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