Evans believes it’s crucial for advisors to be aware of how these valuations are actually hammered out because, given the average age of Canadian advisors, he anticipates we will be awash in books quite soon. As the supply of books skyrockets, he thinks that advisors need to be aware of how these deals are done and how they can maximize the returns they eventually get for their books.
Unfortunately, Evans thinks there is not an adequate pipeline of talent coming through to pick up from the looming wave of retirements. Banks and institutions, he says, are hiring rapidly at the teller level now, but haven’t brought enough people up the chain to the point where they’re ready to become advisors and buy books of business themselves. The result will likely be tougher negotiations around valuations as supply outpaces demand.
To help smooth those negotiations and calculate for the particulars of each individual practice and each potential buyer, Evans and his team have started developing an AI tool with NexusFrontier. The tool should be able to take all documentation required by an FA team for analysis, in any format that it exists, and translate that into dashboard views showing wealth management firms the analytics they require for their unique acceptance criteria and valuation. The AI model is also meant to decipher investor and investment information providing predictive investor and asset retention analytics. The goal, Evans says, is smoother and easier valuations opportunities.
The tech tool, Evans says, can help firms and advisors avoid some of the mistakes made in recent years. During the COVID-19 pandemic Evans claims that books were selling for a premium as large institutions moved to gobble up market share. Many of those deals now look overpriced and many of those institutions are not netting the ROI they needed to justify what they paid.
Advisors should know that the deal negotiation process can go from challenging to ugly quite quickly. Evans and his firm work on almost every side of these deals, with advisors, firms, institutions, and even in the realm of talent searches and support team buildouts. He says that often an advisor who had an arrangement with their institution for the sale of their book will be shocked to learn how little the institution they’ve worked with their whole careers will give them back.
