Parting Shot continued from page 60
So yes. These are extraordinary times to own an RIA. But extraordinary doesn’ t mean permanent. Ever.
Multiples Don’ t Stay High Forever
Ask anyone who owned a technology company in 1999. Or a home builder in 2005. Or certain oil businesses in 2014.
Or look at the veterinarian business, where I helped sell practices at 17 times cash flow right after the Covid-19 pandemic. Those multiples are now back in the 11 to 12 times range.
Industries move in cycles. Capital flows in. Buyers compete. Multiples expand. Debt becomes plentiful. Everyone begins assuming today’ s valuation is the new normal. Until it isn’ t.
RIA multiples, in particular, have several potential vulnerabilities. The first pressure point is interest rates. Many receive favorable long-term capital-gains treatment on qualifying consideration. But Congress can change tax law. What happens if capital gains rates someday move substantially closer to ordinary-income rates? After all, the 1986 tax reform legislation equalized tax rates on income and capital gains. Your business doesn’ t need to decline in value for your after-tax proceeds to decline dramatically.
This means your firm’ s value could double in the next decade, but if capital gains taxes went back to 39.6 %, where would you be? Treading water. And this assumes everything else goes right in your business.
The Math Advisors Should Be Doing
Suppose your RIA generates $ 5 million of EBITDA, and someone will pay 15 times that today for your business— a $ 75 million enterprise value.
What if you decide to wait five years because you believe you can grow EBITDA 10 % annually, and you actually succeed in
Odds are that nine out of 10 times you’ d tell them to de-risk and sell.
Falling markets can mean lower revenue. And that means lower EBITDA. If RIA buyers simultaneously become more conservative, you could get hit twice— the lower earnings now compounded by a lower multiple.
consolidators and private-equity-backed buyers finance acquisitions with debt, and when money becomes more expensive, the same business simply cannot support the same purchase price without reducing the buyer’ s return.
The second pressure point is the stock market. Imagine another period like 2000 through 2002, which wasn’ t a six-week correction but a multiyear bear market. It’ s been a long time since we’ ve had that.
For a business based on assets under management, falling markets can mean lower revenue almost immediately. And that means lower EBITDA. If RIA buyers simultaneously become more conservative, you could get hit twice— the lower earnings now compounded by a lower multiple.
The third pressure point is taxes. Today an owner may be able to sell a business and doing so. Five years later you’ re generating roughly $ 8 million of EBITDA. Fantastic. But suppose the market multiple has fallen from 15 times to 10 times. Your company is now worth approximately $ 80 million. You spent five years growing the business 10 % annually and increased the theoretical enterprise value by only about $ 5 million. Meanwhile, you gave up the opportunity to invest the sale proceeds, diversify your net worth and eliminate five years of business risk.
We’ re not saying you should have sold early. It just means that growth alone isn’ t the equation. And in the end, the“ L” word— liquidity— always carries a premium. What advice would you give your client who owned a roofing company, a pest control company, or a veterinarian clinic?
Don’ t Try To Pick The Top
RIA M & A isn’ t slowing down today. The first half of 2026 saw 167 announced transactions, and after we looked at recent surveys and spoke with a major acquirer, we’ re thinking valuations could either plateau or decline.
That’ s worth paying attention to if you are trying to do what’ s best for you clients and build your net worth at the same time.
If you’ re 45 and love what you do— and you’ re doing it at a business that’ s growing 20 % organically— then holding on to your firm may be the better choice. But keep in mind, the bigger you get, the harder it is to scale at a 20 % compound annual growth rate every year.
On the other hand, what if you’ re 55, your business is growing at 5 % and you have 80 % of your net worth tied up in it— and what if buyers are offering you a historically extraordinary multiple? You might then give this offer some hard consideration before waiting another decade to sell.
The decision isn’ t:“ Should I sell my RIA?”
It’ s more like,“ How much additional growth do I need to justify the risk that today’ s multiple, today’ s tax rates and today’ s buyer appetite won’ t be there when I’ m finally ready?”
I believe RIAs will remain great businesses for a very long time. I just wouldn’ t assume buyers will pay today’ s prices forever.
You ask your clients to assess the risks in their own financial plans. Maybe it’ s time to look under the hood and do the same for yourself.
TED JENKIN, CFP, CEPA, AAMS, AWMA, CRPS, CPRC, CMFC, is managing partner at JPTD Partners.
58 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2026 WWW. FA-MAG. COM