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These Factors Can Increase the Value of Your Firm

These Factors Can Increase the Value of Your Firm

Many owners of financial advisory practices don’t know what their firm is really worth and, in fact, many believe it is worth more than it actually is.

Do you know what your wealth management firm is really worth?

Believe it or not, many owners of financial advisory practices don’t know what their firm is really worth and, in fact, many believe it is worth more than it actually is. A recent Cerulli Associates report found that the average owner of an advisory firm has an inflated view of its worth. While the average advisor believed their firm was worth 2.8 times annual revenue, the market is currently valuing firms at 2.2 times.

Today’s ever-changing marketplace has made it increasingly important that stakeholders of wealth management and financial advisory firms understand the foundational value of their businesses. Without this understanding, business owners may have unrealistic expectations for the business’ value to the buyer; or even worse, be leaving money on the table when it comes time to sell.

In order to maximize the market value of wealth management practice, stakeholders should assess all areas of the business that may positively or negatively impact its value. By maximizing the premium factors and minimizing the discount factors, business owners can ensure the true value of their firm is realized.


Premium Factors

  • Marketing Systems
  • Referral Systems
  • Professional Contacts
  • Location Advantage
  • Projects in Process
  • Customer Relationship Management (CRM) Systems
  • Community Niches
  • Specialist Staff
  • Good Will
  • Future Projects


Premium Factors for Your Firm

Premium factors are those that positively impact future growth of the business and this begins with the acquisition of new clients. New clients are key to a healthy, growing wealth management practice and make the firm very attractive to prospective buyers. Consistently acquiring new clients requires establishing systems and processes that enable you to attract new prospective clients, be referred to friends and family of existing clients, and provide a consistently, exceptional client experience.

Delivering this exceptional client experience starts with fully documenting the client service process across all areas of the business. This should identify each step of the process, when the step takes place, who is responsible for the step, what is the expected outcome of the step, and the location of supporting materials. This document is a considerable asset for the buyer to ensure clients’ expectations are met.

The next premium factor is the implementation of a customer relationship management (CRM) solution, where all client-related activities can be easily tracked and updated. A CRM creates the firm’s central repository of client information that is easy to enter, edit and retrieve. Every interaction that takes place with a client can (and should) be recorded into the CRM in order to build up a complete client history profile over time. Since the CRM contains all of the client contact information, it is the core tool for managing marketing activities.

In addition, an effectively utilized CRM can help identify future opportunities within the existing client base, such as inheritance or wealth transfer, 401(k) rollovers or selling a business.

A documented marketing system can also drive the foundational value of the business higher. This marketing system includes active marketing processes that can generate near-term results, such as seminars, community involvement and referral programs, and other passive marketing capabilities with a longer term focus. Examples of the latter include websites, direct mail campaigns, newsletters, advertising, etc.

Maximizing Your Firm’s Value

These premium factors can provide the most overall impact to an advisory firm’s value. Stakeholders should focus their attention on these key areas when looking to create an estate, internal or external buyout plan in order to maximize the firm’s value.


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Bill Snyder is a practice consultant (BMS) at 1st Global. Bill works with multi-partner, ensemble firms to inform, educate and coach. 1st Global Capital Corp. is a member of FINRA and SIPC. Additional information about 1st Global is available via the Internet at