Why Culture-First Firms Will Win in 2025
Looking ahead to 2025, the landscape for advisor acquisitions is poised for continued disruption. The trends aren’t any secret. Here’s a short list of reasons why I think 2025 will see significant, accelerated growth for well-positioned culture-first firms.
They will be low-volume, high-quality buyers.
Here’s what I’m seeing happening right now. You have advisors, usually between $350M-$1B+ AUM who are getting organic, inbound interest from great advisors looking to sell. They have great culture, strong teams, and streamlined processes. They’re not volume buyers, and that’s part of their appeal.
Similarly, I’m talking to RIA owners (usually $1B-$20B AUM) who are starting to get organic inbound requests to buy as well. In a similar sense, advisors are coming to them because they know these firms already have a strong, driving culture. Their culture isn’t just on the sale brochure.
As I heard from one RIA president: I have a long list of great advisors looking to sell. I have an absolute shortage of buyers who are qualified both in terms of finances and culture.
Conclusion–the well-built, well-positioned firms will command great leverage in the coming retirement wave.
Culture-first firms grow organically.
Like I mentioned, culture isn’t just something you can claim. You have it or you don’t, and the ones that truly have it are the minority. They serve their clients impeccably, and they get referrals because of it.
One specific stat comes to mind. At one of the biggest independent firms, just 1% of advisors account for over 90% of new assets. What does this mean for PE firms that are buying up 99% of businesses in droves that don’t know how to grow their books of business?
For this reason, culture-first buyers and sellers will be in a premium position for transitions.
Culture-first firms don’t need acquisitions.
Because these firms don’t need acquisitions to grow, it makes them very selective buyers in the best way. They only want to buy books of business that represent a step forward for their trajectory. As one advisor told me, “Why would I buy a book that’s 25% percent of mine when I grow organically at 30% a year?”
What I love about it is that it’s a growth strategy that prioritizes healthy fundamentals. One of my big concerns with these grow-by-acquisition firms is that the money has to come from somewhere, not just debt. I hear all the time from advisors at acquire-first firms that service is declining and everything seems like a play to attract PE.
When we ignore fundamentals and resort to inorganic growth, I have my doubts about how sturdy the growth plan is.
Firms with strong cultures will be more selective about the books of business they buy, and I think that’s an incredible advantage.