Tibergien, Seivert: RIA Deal Market Favors Neither Buyers Nor Sellers

And, while the number of sellers is in the "medium" range, despite the large number of buyers, "there's a lot of pretenders and folks that are talking about it, and a very few number of folks that are actually doing most of the transactions," he said.

Tibergien agreed with the mixed market conclusion, saying that although there were indeed signs we're in a seller's market, there is a tendency among some firm owners to "panic and consider fire sales" due to concerns around the pandemic and economic crisis.

Also, "buyers are structuring terms with earn-out and clawback characteristics, [but] that works well for advisory firms who are able to perform," he said.

The Valuations Debate

In general, valuations of a wealth management business are "not appropriate" for sellers of firms that fall in the over $5 billion, $800 million-$500 billion and $200 million-$800 million categories, Seivert argued.

Valuations become more appropriate for businesses in the under $200 million category, where there are "far fewer buyers" and "a ton of sellers," and where the "risk of the business model is viewed as quite a bit higher," Seivert said.

However, Tibergien argued that valuations were appropriate in general for reasons including the "degree of uncertainty" now as a result of the pandemic and economic crisis.

Among other topics, Seivert and Tibergien stressed the importance of advisory firm owners — especially those 60 and older — being both emotionally and financially prepared to exit their businesses before putting them on the market and moving on.

Succession planning is a must, Tibergien advised, noting he was prepared — "and I had been prepared for a while" — to step down from his firm before retiring early this year.

— Related on ThinkAdvisor:

• Tibergien's Departing Advice for Advisors in a Pandemic
• 6 RIA M&A Trends to Watch Now
• Most RIAs Unprepared to Strike an M&A Deal: Survey