The Heart Of The Deal: DeVoe And Allworth Survey Emotions Of RIA Sellers

Michael Madden, Contributing Editor & Research Analyst, Wealth Solutions Report

Firms Issue White Paper Exploring Emotional Considerations Of RIA Sellers, Reveals Owners Not Only Motivated For Selves, But Strongly Concerned For Clients And Staff 

DeVoe & Company and Allworth Financial issued a white paper examining the emotions of RIA sellers titled “The Heart of the Deal: Understanding and overcoming the emotional barriers of selling your RIA.” Through a survey and conversations with RIA leaders, DeVoe and Allworth formed a portrait of the emotional elements of an acquisition from the seller’s perspective.

David DeVoe, Founder & CEO, DeVoe & Company

The firms uncovered several key fears and motivations affecting sellers, including fear of yielding control, concerns for staff, improving client service and selling to the wrong buyer.

In the accompanying press release, David DeVoe, Founder and CEO of DeVoe & Company, said, “Selling your firm is likely the most important business decision of your career. But it is also a profound personal decision. All sellers will experience an emotional rollercoaster through the process. Anticipating the strong emotions that will emerge will optimize the likelihood this important transaction gets completed, and the new partnership starts on the right foot.”

Pat McClain, Co-founder, Allworth Financial

Allworth Co-founder Pat McClain, said, “You pour your heart and soul into nurturing something, then it comes time to sell, and you’re faced with feelings you couldn’t have anticipated. Our hope is that this paper will facilitate not only a deeper understanding of the experiences of other principals who have gone through a deal, but it will help guide them as they make important decisions about the future.”

The Need For External Acquisition

The paper begins by explaining the need for external acquisition from a seller’s perspective. Though RIA owners prefer to sell to someone they know and trust, who are often the second generation of leaders in the RIA, there is a lack of succession planning, with 64% of respondents saying that it constitutes a large problem for the industry, and an affordability gap, with RIA valuations increasing so that many second generation leaders can no longer afford to buy.

Sellers’ Aspirations

The paper explains both aspirations motivating an external sale and concerns weighing against it. Aspirations for clients, staff and the owners themselves dominate the motivating factors uncovered by the survey, with concern for clients’ long-term care as the primary factor for 42% of sellers.

The current valuation of the company was the main motivation for 19% of respondents, with retirement timing at 17% and career path options for staff primarily motivating 15% of sellers. 

Sellers’ Worries

Fear of losing control

Giving up control was the primary fear of 34% of respondents, the highest of all categories. Selling to the wrong buyer was the greatest fear for 23%, and a change in client care most concerned 22%.

Giving up a leadership position and staff opportunities both followed at 8%. The paper points out that both the motivations and fears centered on the same three groups: owners, clients and staff. 

On a further breakdown of fears between firms with over $1 billion in assets under management and firms under that number, giving up control concerned the smaller RIAs more, at 39%, versus 30% for larger firms. Uncertainty for staff opportunities showed a strong contrast, with 13% of larger firms concerned, but only 2% of smaller firms naming the same fear.

Losing Control And Retirement

The paper provides a breakdown of the four primary elements in the fear of losing control, which are the fear of change, the fear of becoming an employee, disagreement with management decisions and losing control of the business. 72% of respondents said they would like to remain in leadership or a senior advisor position for at least several years.

The paper also discusses the emotional journey of retiring founders, including concerns about leaving a good legacy, changing life and identity, and letting go emotionally from the business.

Michael Madden, Contributing Editor & Research Analyst at Wealth Solutions Report, can be reached at ContributingEd@wealthsolutionsreport.com

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