Whether you’re preparing for a sale, evaluating a merger opportunity, or simply want to better understand your firm’s position in the market, knowing how to value a wealth or asset management business is critical. And while the process may seem complex, it doesn’t have to be.
With a clear understanding of the core valuation methodologies and industry-specific factors, firm owners and executives can confidently assess their company’s economic worth. Below, we break down the methods commonly used to value RIAs and asset managers, highlighting the nuances that matter most in this space.
What Is Business Valuation in the Context of RIAs and Asset Managers?
Business valuation refers to the process of determining the economic value of a business. In the wealth management and asset management sectors, this is typically done to support M&A transactions, succession planning, partnership buyouts, or strategic planning.
But unlike other industries, the valuation of RIAs and asset managers hinges on factors like recurring revenue, client retention, growth rates, and advisor relationships. It’s not just about what the firm owns—it’s about the strength and durability of its revenue streams.
Common Valuation Methods for Wealth and Asset Managers
1. EBITDA Multiples
This is the most widely used valuation method in the wealth and asset management industry. Buyers typically apply a multiple to a firm’s normalized EBITDA (earnings before interest, taxes, depreciation, and amortization), adjusted for owner compensation and non-recurring expenses.
- Firms under $200M in AUM typically see multiples in the 6–8x range.
- Firms with $300M–$900M in AUM may achieve 9–12x, especially with strong growth or attractive client demographics.
- Firms over $1B in AUM are considered “platform-worthy” and can command 10–14x EBITDA or higher, particularly if they have proprietary technology, a scalable model, or M&A potential.
2. Revenue Multiples
For smaller firms or those with inconsistent profitability, a multiple of recurring revenue may be used. These multiples typically range from 1.5x to 3x annual revenue, depending on growth, retention rates, and client demographics.
Note: Valuations based on revenue are most useful as a secondary metric and are often averaged with EBITDA multiples to triangulate value.
3. Discounted Cash Flow (DCF)
DCF is used to estimate the present value of future cash flows, especially for firms with predictable revenue and margin stability. While it is less commonly used on its own for smaller RIAs, it can be powerful for internal valuations or firms with multiple business lines and significant growth projections.
4. Market Comparables
This method involves benchmarking against recent transactions in the RIA space. If your firm is similar in AUM, service model, or geography to a recently acquired firm, its transaction metrics can provide useful guidance. That said, comps should be used with caution—no two RIAs are exactly alike.
Key Factors That Impact Valuation
Recurring Revenue Quality
The strength of your recurring fee-based revenue—especially if it’s tied to discretionary AUM—is central to your firm’s value. Advisory firms with high-retention, high-quality revenue streams will always command a premium.
Client Demographics
A client base of HNW and UHNW households increases perceived stability and wallet share. Younger, multigenerational clients also enhance long-term enterprise value.
Growth Rate
Organic growth matters. Firms with a proven ability to consistently attract new clients and assets—without relying solely on market returns—receive higher valuations.
Owner/Advisor Dependence
The less reliant the firm is on one or two key individuals, the more valuable it is. Institutionalized relationships, next-gen talent, and succession planning add durability.
Margin and Operating Model
Firms with scalable operating models and healthy margins (typically 35–50% EBITDA) are far more attractive to buyers and investors.
How to Choose the Right Valuation Method
For wealth and asset management firms, EBITDA and revenue multiples tend to dominate discussions in transactions. However, combining these approaches with a DCF or using comps from recent M&A activity can help firm owners create a more complete and defensible view of value.
When preparing for a sale or merger, it’s critical to engage with industry-experienced advisors who can account for firm-specific nuances and market dynamics.
Contact InCap Group Today
At InCap Group, we specialize in advising wealth and asset managers on valuation, growth strategy, and M&A execution. Our team brings deep sector knowledge and transaction expertise to help firm owners maximize outcomes, whether they’re preparing for a sale, planning for succession, or simply benchmarking their enterprise value.Contact us today to learn more about how we can support your valuation or transaction planning needs. With the right guidance, you’ll be positioned to make informed decisions that protect your legacy and create lasting value.