AGS Study Reveals Top Factors Driving M&A Market, Firm Valuations

Last Edited by: LPL Financial

Last Updated: May 02, 2023

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Charlotte, N.C. – May 2, 2023 – LPL Financial LLC (Nasdaq: LPLA) (“LPL Financial” or “LPL”), today announced the release of a study conducted by Advisor Growth Strategies (AGS), sponsored by LPL, describing key issues impacting today’s wealth management M&A market and their effect on firm valuations. “Maximizing Independence: Valuation Myths and Realities” can help independent advisors understand what valuation metrics matter and how they can leverage market intelligence to increase firm value as they grow their practice.

To inform what is driving fair market value for independent advisors, AGS tested valuations between RIAs and independent practices leveraging a shared ADV on a Corporate RIA. Through this research, AGS found that affiliation model — whether through an independent RIA, a shared ADV corporate RIA model, or other wealth management firm — has little impact on business valuation for most firms.

Marc Cohen, executive vice president of Strategic Programs at LPL, said this dispels the long-standing myth that advisors must operate independent RIA firms to maximize the enterprise value of their business. “Today’s M&A market favors growth, efficiency and talent over whether an independent firm does ‘everything in-house’ or outsources certain functions such as compliance and risk management to a platform provider,” he said. “As the industry has matured, we have learned more about what drives value based on the significant number of transactions that have been completed in recent years. Advisor Growth Strategies’ findings in this study provide a strong roadmap to independent advisors seeking to maximize their value, including a compelling argument to increase their utilization of outsourced providers for non-core functions to allow them to direct their own efforts directly at growth.”

The study evaluates the largest factors impacting firm valuation, defining these as “true drivers of value:”

  • Profitability: The firm’s ability to drive profit margins
  • Growth: The firm’s organic growth, net of market performance
  • Target Client Market: The firm’s geography and the market available for future growth opportunity
  • Team: How firm culture, client service model, talent management, governance and support structure create synergy throughout the transaction 

The study goes on to examine six common valuation misconceptions: independent RIA registration, branding, technology, compliance, operations and investment management. Although each can help preserve value and create opportunity, the study cautions advisors not to over-emphasize these factors and instead focus on execution, growth and scalability. The study also offers six steps to managing business equity and calls to action for independent advisors to maximize value.

“Much of what advisors think they know about valuations and operating in the independent space is based on conjecture and hearsay,” added Brandon Kawal, principal at AGS. “Through this study and report, we hope to dispel some of those misunderstandings and help advisors choose the appropriate path to maximize the value of their firms.”

“Whether they are looking to enter the M&A market or not, business owners have exciting opportunities ahead in the independent wealth management industry,” Cohen said. “LPL’s robust support platform and consulting services can help advisors improve their long-term options and achieve their business goals, including seeking maximum value when it comes time to sell.”


Advisors, find an LPL business development representative near you.

About LPL Financial

LPL Financial (Nasdaq: LPLA) was founded on the principle that the firm should work for the advisor, and not the other way around. Today, LPL is a leader in the markets we serve, supporting more than 21,000 financial advisors, including advisors at approximately 1,100 institution-based investment programs and at approximately 500 registered investment advisor ("RIA") firms nationwide. We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to personalized guidance from a financial advisor. At LPL, independence means that advisors have the freedom they deserve to choose the business model, services, and technology resources that allow them to run their perfect practice. And they have the freedom to manage their client relationships, because they know their clients best. Simply put, we take care of our advisors, so they can take care of their clients.

LPL and its affiliated companies provide financial services only from the United States.

Securities and advisory services offered through LPL Financial LLC, an SEC-registered broker-dealer and investment advisor. Member FINRA/SIPC. We routinely disclose information that may be important to shareholders in the “Investor Relations” or “Press Releases” section of our website.

Advisor Growth Strategies and LPL Financial are separate entities. Throughout this communication, the terms “financial advisors” and “advisors” are used to refer to registered representatives and/or investment advisor representatives affiliated with LPL Financial LLC. 

About Advisor Growth Strategies

Advisor Growth Strategies, LLC (“AGS”) is an M&A advisory and management consulting firm for Registered Investment Advisors (“RIAs”). AGS understands the business of running a business and collaborates with RIAs to identify ideal partners for long-term success. It encourages an M&A candidate to reimagine what its future business could be. The team deploys a strategic and comprehensive evaluation to explain all options to ensure the decision-making process will add value for key constituents — owners, employees, and clients.