PE money challenges RIAs’ internal succession plans

NAPA, Calif. – The gap between what internal and large external buyers can pay for a stake in an RIA is pricing out the next generation of advisor-owners and can complicate firms’ succession plans, according to investment banker David DeVoe. 

Speaking at Citywire RIA’s Napa Valley CIO Summit on Thursday, DeVoe said that owners commonly look to discount the value of their stake by about 25% when they sell internally. 

Meanwhile, external buyers, especially private equity-backed RIAs, are often offering sellers a meaningful premium, creating a dynamic that can complicate potential internal succession plans, the CEO of RIA consultant and investment bank DeVoe & Company explained.