“Each of them have found an advantage and are no longer thinking of value in terms of a multiple of EBITA,” Canter says. “They’re also conducting demography analyses as part of their valuation process.”

Fidelity argues that firm value is derived from eight factors: Size, revenue growth and structure, organization, leadership, capabilities, client experience, cost structure and client demographics.

“We believe that demographics are starting to catch up to RIAs and more firms are going to start planning,” Canter says. “They’re going to be buyers, sellers or those who decide that their business will endure and have next generation and ownership.”

Canter says that RIAs aren’t developing next generation talent—while 59 percent of high-performing firms reported having next generation advisors as equity partners or owners, just 21 percent of respondents overall said the same.

“If there’s no way to help these next generation advisors buy into the firm and then to become liquidity sources for you, you’re going to be faced with being a seller or the business won’t survive,” Canter says. “You have to think of leadership as an intergenerational issue.”

At the same time, firms are dealing with an aging client base, Canter says. “RIAs have to understand that they have concentration risk. They need to think about how they can engage with younger clients, starting with the children and the grandchildren of their existing clients so they can build a pipeline. What’s getting them their revenue today won’t get them their revenues tomorrow.”

RIAs might have to alter the way they do business to attract enough next generation money to soften the impact of impending retirements, changing their service model and offering.

“They won’t be able to continue servicing aging clients with large accounts, and therefore they won’t be able to assess a fee for managing assets,” Canter says. “Successful advisors are targeting clients with minimums below what they usually require. To secure their future, they’re filling their client pipelines with high-earning investors who, with the help of their advice, will become those larger accounts.”

In general, RIA benchmarking study respondents still charge their clients an asset-based fee, Canter says, but new assets from existing clients are no longer the major drivers of revenue growth, accounting for nearly 6 percent growth in RIAs and almost 8 percent growth for high-performing RIAs between 2011 and 2014.

Instead, assets from new clients were the leading cause of growth for RIAs between 2011 and 2014, accounting for nearly 10 percent growth overall and 11 percent growth for high-performing firms. Market performance was the second-leading driver of growth, accounting for more than 7 percent growth for RIAs in general and almost 9 percent growth for high-performing firms.