Journal of Financial Planning: March 2026
Brandon Kawal leads client M&A and management consulting engagements, thought leadership, and research at Advisor Growth Strategies (www.advisorgrowthllc.com). He brings a unique blend of insight, creativity, and analytical expertise to help firms tackle their most complex challenges. He specializes in guiding advisory businesses through pivotal strategic decisions, whether navigating internal succession or exploring M&A opportunities in the external market.
Succession planning has long been a thorn in the side of RIA owners. The internal process is emotional and dynamic; the success and grind of building a business can be blinding, and a long-term horizon can delay execution. Meanwhile, external market pressures persist, with M&A remaining red-hot and valuations rising. Despite the challenges, 51 percent of RIA owners would prefer to transition their business internally, according to private research we conducted in 2025.1
Internal succession is not a lost cause, even if the daily headlines focus on the latest M&A transaction. However, internal succession is not the same process as it was 10 years ago. External valuations increased by 67 percent from 2019–2024, and the next generation is in danger of being priced out. Transaction volume continues to rise, and a talent war driven by large RIA platforms creates unique recruiting pressure as the industry cannibalizes talent. Internal succession is achievable but more nuanced than in years past. The new success metric for internal succession planning is not a full transition but rather maintaining the option to do so in an increasingly dynamic marketplace.
Waiting Too Long to Plan
Cerulli Associates estimate more than $3.9 trillion of AUM will need to transition over the next decade.2 Ten years seems like an eternity when running a business day-to-day. Prior internal succession planning guidance suggested a minimum of three to five years to progress a succession plan. However, today most RIAs will need a full 10 years to execute internal succession.
Waiting too long to plan creates a quantitative and qualitative trap for owners. In an environment with elevated valuations, the next generation is likely unable to afford the required amount to transition equity if backed into a tight timeline. Internal transitions often require favorable financing, supported by the current ownership group, to improve accessibility and spread payments.
Avoiding this trap requires a commitment to short- and long-term strategic planning. Talent acquisition and development, organic growth planning, and building consistent processes are key to both strategic planning and a strong internal succession plan. RIAs who integrate internal succession planning into their annual strategic planning will sidestep this trap.
Confusing Person-Led Growth with Systematic Growth
The average RIA is modestly growing, driven by sources other than stock market returns. A decent organic (net of market) growth rate is 5–7 percent, and an elite growth rate is over 10 percent per year. Organic growth is the most important metric for an RIA’s health and valuation. However, for internal succession, it is important to look beyond the aggregate organic growth rate to avoid falling into a sustainability trap.
The misidentification of the source of organic growth is a trap. Is the growth dependent on a person or a system? This distinction is critical because many RIAs lacking systems for organic growth will risk eroding confidence with their next ownership group. Conversely, some firms could find themselves asking next-generation buyers to purchase equity that assumes growth generated by them.
Avoiding this trap requires a critical evaluation of the firm’s growth systems. Do clients find the firm through the personal influence of key individuals? Will that growth be sustained through an ownership transition? Assessing an organic growth system early can help manage risk, maintain a key valuation input, and improve overall sustainability.
Assuming External Valuations Apply Internally
The rise in external valuations has put pressure on internal succession conversations. According to The RIA Deal Room research, the median adjusted EBITDA multiple increased 67 percent from 2019 to 2024.3 There is no question that the RIA industry has attracted outside capital, and demand for M&A transactions has increased dramatically. The shift over the last five to seven years has led to scenarios where internal valuations can be as low as half of the external market price. At face value, the gap between internal and external valuations can be insurmountable.
A deeper look reveals how headline valuation multiples are misleading. They reflect two critical components: the buyer’s return model and the buyer’s preferred deal structure. Internal and external buyers have different return and risk profiles, which create vastly different valuation profiles. Likewise, external buyers have different levers they can pull to enhance valuation, depending on the shared risk a seller is willing to absorb. External valuations simply cannot be applied internally because the rules of the game are different.
The best way to avoid this trap is current and next-generation owner education. There is no shortage of buyers, bankers, recruiters, and consultants willing to explain the market temperature. This education allows owners to holistically compare internal and external valuations and leads to a more realistic evaluation of price, structure, and tradeoffs.
Tilting Too Far Toward Execution or Management
The operating culture of an RIA matters when it comes to internal succession. Founders are typically forced to evolve from a player focused on execution to a player–coach focused on both execution and development, and then to a manager. This journey is critical because it reflects the core competencies needed to propel the business forward beyond the founders. That said, problems can arise if internal successors are better at one than the other.
The trap in this continuum is allowing the business to become too focused on management rather than production, or vice versa. This can create a challenging environment for internal succession, as the business has too much of a good thing. Neither production (e.g., providing advice) nor management is a bad competency. However, the average RIA needs both in order to succeed.
Avoiding this trap requires a thoughtful execution plan that helps put the right people in the right seats. Building a career path and planning a future organizational structure is key to ensuring sustainability. Not only will the business require several contributors to grow effectively, but current metrics also indicate that at least three to four contributors are needed per selling owner. Many RIAs fail to consider the resources they need to reach their goals until it is too late, and rushing to plug a hole can lead to a lack of balance and an inability to perpetuate beyond the current ownership group.
Failing to Invest in Talent and Process
“Key person risk” is a commonly used phrase when discussing valuations of RIAs or other service businesses. It is a longstanding catch-all term for the risk embedded in an owner’s reputation, knowledge, or know-how. For an RIA, a simplified explanation is that if a key person transitions, wisdom departs, and the clients follow or the firm can’t grow. We already covered the growth trap, but talent and process wrap around both growth and retention.
The succession trap of failing to invest in talent and process makes the business less transferable and riskier. Talent is needed to both build a market for internal equity and to steward client relationships beyond a current ownership group. A process that governs the client experience is a key underpinning as process moves client interactions to a business-level versus a key individual.
Navigating this trap is explicitly tied to shifting away from a practitioner’s mindset to a business manager’s mindset. RIAs seeking to maximize succession options will need to shift the business away from relying on one or two exceptional contributors and instead focus on a repeatable client experience built on process. This investment of time, money, and effort will not only increase the likelihood of internal succession but also improve external valuation. This valuation strength enhances optionality and supports better decision-making for all stakeholders.
Despite the shifting succession-planning landscape, the fundamentals remain the same, but the traps are bigger and more numerous. Failing to plan early and systematically manage the business for sustainability could result in loss of talent and reduced succession options. These succession traps can slowly back an owner group into a corner and force a suboptimal decision. The new success measure for RIAs is maintaining maximum optionality and making decisions from a position of strength. Avoiding the most common succession planning traps will lead to better outcomes for a firm’s clients, team, and all stakeholders.
Endnotes
- These findings are based on responses from 69 firms with an estimated $140 billion in assets.
- Cerulli and Associates. 2025. U.S. RIA Marketplace 2025. www.cerulli.com/reports/us-ria-marketplace-2025.
- Based on AGS comparison of proprietary research. For more information, see the RIA Deal Room reports from 2020 and 2025, available at www.advisorgrowthllc.com/ria-deal-room.