This is another sign of industry resilience, Nesvold said.

“When you look at M&A globally for all industries, M&A volume was down 30% year to year in the first half of 2022, but up in wealth management,” he said, adding that he expects to see continued strength in 2023. 

The reason? First, he said, the amount of private equity money that’s come into the industry has created a cadre of professional buyers who are disciplined enough to ignore market timing and focus on acquiring attractive business regardless of the markets. And second, there’s a strong population of advisors aging out of the business.

“If you were a 55-year-old advisor during the Great Financial Crisis, you’re almost 70 now,” he said. “These deals are going to happen simply because of demographics.”

Valuations Remain High

For many of those advisors ready to retire out of the business, valuations remain high, the panelists said, but some of the terms are changing. Much of the data here is put together informally, they admitted, as while there’s reasonable transparency for deal volumes, valuation data is hard to come by.

“It’s very opaque, there’s no transparency,” Bhattacharyya said of the advisory industry. “But what we’re seeing personally is mid-teens EBITDA multiples. And that’s for several billion in assets, the right geographic regions, a young management team and real firm growth.”

EBITDA—earnings (net income) before interest, taxes, depreciation and amortization are deducted—is a common way for potential buyers to look at a company’s profitability.

While sellers would love for pricing to be tied to revenue, “that’s not relevant,” Tibergien said. And sale multiples can appear to be all over the ballpark, he continued, because different advisory practices will be priced differently as buyers factor in future prospects.

“If it’s a small advisory practice with no capacity and with old clients, it’s going to be priced differently than if it’s a more dynamic firm that has organic growth. We’re talking about professional investment here in people who advise clients for a living,” Tibergien said. “The buyer has to understand what the growth potential is in any of their businesses, and what the likelihood of continuity is.”