Despite record M&A volume and valuations and a continuing influx of investment into the wealth management industry, buyers are getting more picky about their deals, a new study found.
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As part of its annual “RIA Deal Room Report” last month, management consulting and transaction advisory firm Advisor Growth Strategies presented 17 active industry buyers with six hypothetical advisory practices that managed between $200 million and $2 billion in client assets with varying numbers of owners, employees and recurring revenue. The firm asked the buyers which of the six registered investment advisory firms or other practices would present an “ideal acquisition target” for them.
None of the prospective sellers appealed to all of the buyers as an ideal fit for their plans. But that sample, the firm’s confidential survey of the metrics from 60 transactions in 2025 and other M&A data pointed to some key traits that appeal to buyers.
With buyers being “aggressively selective,” the numbers display how there is “a huge increase in demand, but also a huge increase in trying to pick your lane, in terms of how you’re trying to compete,” said Brandon Kawal, a partner at Advisor Growth and, alongside Managing Partner John Furey, the co-author of the study.
The “biggest point that we wanted to get across” to buyers and sellers alike is that no firm showed up as 100% ideal, he said. “You can’t be all things to all people. And the same thing is true in M&A. You can’t be the best partner to all opportunities.”
READ MORE: What RIA buyers and sellers are prioritizing in a shifting market
‘Vanishing’ into deals with big valuations
Regardless, the analysis displayed that firms with between $500 million and $5 billion in client assets are increasingly driving the largest number of transactions each year — which led Advisor Growth to brand them as “the vanishing middle” of RIAs and other advisory practices.
And, to fetch a valuation at or above the new median high of 11.6 times a firm’s earnings before interest, taxes, depreciation and amortization [EBITDA], sellers need “premium attributes” like healthy organic growth, a client niche or specialty, an “engaged” second generation of financial advisors in a succession plan and “simple” investment operations, the report said. Key-person risk from aging ownership, flat growth rates and complex, layered investments don’t look as appealing.
“A $500M AUM firm can expect outcomes ranging from 9x to 15x depending on how it is positioned,” the report said. “The difference comes down to a short list of attributes buyers are willing to pay up for.”
The definition of “middle” in the report of a firm with between $500 million and $5 billion in client assets reflects how “everything has gone up” in recent years across the industry, said Jodie Papike, CEO of recruiting firm Cross-Search. That doesn’t mean that firms that are smaller are necessarily “not a sizable practice,” but it does speak to the fact that fee-based advisory accounts are “so scalable compared to the commissionable” side of the business, she said. And that creates some challenges for advisors expecting to see massive offers from RIA aggregators and other investors lining up for a bidding auction when they decide to put their firms up for sale.
“The most valued attribute of a practice is obviously where the assets sit — is it business that someone can take over, and is there higher likelihood that those clients will stay in place?” said Papike. “There’s always going to be a higher multiple on business that’s recurring.”
Valuations have “kind of stabilized at very high levels,” according to Jess Polito, founder of M&A advisory company Turkey Hill Management. She said she generally agreed with the report’s suggestions about what makes sellers stand out to potential buyers, although she added that geographic location could also make a difference to acquirers trying to reach certain areas, and some of them are looking specifically for firms with, say, $250 million in client assets, too.
“Attractiveness is in the eye of the beholder,” Polito said, calling “organic growth, net of market” the “single greatest predictor” of a firm’s valuation. “Most of the buyers out there are capital-backed, and one of the mandates of their capital backer is to grow.”
READ MORE: Think your firm’s worth 16x EBITDA? Not so fast, say valuation experts
No seller is everyone’s favorite
The numbers from the Advisor Growth case study asking buyers which prospective sellers they would call “ideal” targets present the evidence of that point. The most popular choice among 80% of the buyers was a firm with $500 million in assets under management, 12 employees, two owners and 95% recurring revenue. In a second-place tie, a firm with $800 million, 15 employees, two owners and 90% recurring revenue and another with $2 billion, 57 employees, 10 owners and 95% recurring revenue both drew 67% of the buyers. On the other end of the spectrum, a firm with $500 million, 10 employees, three owners and 75% recurring revenue attracted no buyers. And a firm with $1 billion, 27 employees, five owners and 95% recurring revenue drew only 47% of them.
“The implications are real, as buyers are cognizant of their position in the market and the frothy M&A conditions,” the report said. “M&A is a valued growth strategy for an estimated 80 firms in the industry, and more are adopting it each year. This expanding pool of demand creates a challenge: how do you stand out from the crowd? While most buyers want to do as many deals as possible, the reality is that they need a nuanced approach to their deal flow.”
And those findings may not seem possible to some RIA owners running their firms while getting “10 calls or emails a week from people who want to buy you or take you to market,” Kawal said. But competition from larger firms and resource constraints for some independent advisory practices are putting firms with between $500 million and $5 billion in client assets “at the biggest inflection point” in their businesses, he said.
“There’s a lot of pressure on those firms,” Kawal said. “It doesn’t mean you can’t remain independent and sustainable on your own. It’s just harder.”
READ MORE: Solo advisors can thrive in a consolidating industry. Here’s how
Advisor Growth Strategies
The alternative path
If they do decide to embark on a sale, the study laid out how RIAs and other advisory practices can attract those higher valuations. For starters, owners can think through which of the four types of acquirers they would be open to joining: “large, systematic acquirers” with more than $50 billion in assets who want to buy accretive, growing businesses at their “core” or purchase “satellite” firms that expand their capabilities; “mid-market systematic acquirers” with between $20 billion and $50 billion in assets who have the same basic approach but with a smaller scale; “emerging acquirers” who are ramping up their M&A; or “opportunistic/boutique acquirers” who have highly focused strategies.
From there, prospective sellers must consider their growth rates, the degree that they have found a client niche and how to “invest in talent now or pay later,” as the report called it. For all of the discussion of the looming succession challenge amid upcoming advisor retirements, wealth management remains “a talent-starved industry right now,” Kawal said. An advisory team’s investment operations also come into the mix for buyers seeking to combine incoming advisors with their existing base and technology tools. And the bottom line for valuation revolves around organic growth.
“If you’re too out of the target box on the way that you invest, it may work for you, but a buyer is going to look at that as friction,” he said. “This is really about fit, but all of these things roll into the growth side of the equation.”
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