What industry consolidation can teach advisors about their own succession planning and firm value

Globe and Mail

4 hours ago

Succession planning has long been the Achilles' heel of the wealth management industry. Some studies suggest that 80 to 90 per cent of advisors have no formal succession plan – a startling gap for a profession built on planning for others.
At the same time, the industry is experiencing an unprecedented wave of consolidation. The result? A perfect storm of capital, urgency and opportunity.
Two recent transactions capture this moment: Bank of Montreal's acquisition of Burgundy Asset Management Ltd. and Sagard Private Equity Canada's take-private of Lorne Park Capital Partners Inc. (also known as Bellwether Investment Management). These are more than headline-grabbing deals. They reflect a profound shift in how value is being defined and who's best positioned to capture it.
A feeding frenzy is underway in the Canadian wealth management space. Banks, independent dealers, private equity firms and consolidators are seeking exposure to high-margin, recurring, fee-based revenue. The demographics are on their side: more than half of Canadian financial advisors are over the age of 50, with succession planning looming large.
But while capital is abundant, high-quality platforms are not. That's why deals like Burgundy and Lorne Park matter. They're not just M&A transactions – they're signals to the rest of the market about what gets rewarded.
In Burgundy's case, the co-founders were remarkably candid. In an email to clients shortly after the sale announcement, Tony Arrell explained that their original intention had been to transition ownership internally. However, by the time they considered it seriously, the opportunity had passed: employees lacked the capital to fund a meaningful buyout, and the leadership was unwilling to dilute their long-held value-investing principles to attract outside financing.
In the end, BMO offered what internal succession could not: a culturally aligned partner, liquidity through publicly traded stock, and a structure that preserved Burgundy's investment autonomy while ensuring long-term continuity for clients and staff.
It's a story many founders know too well: they want to keep ownership 'in the family,' but the financial, operational and leadership handoff is rarely achievable without compromise. For firms that don't have Burgundy's scale or brand equity, it's even harder.
Ask most advisors what their practice is worth and you'll hear a familiar refrain: two to three times trailing revenue. The widely accepted industry rule of thumb implies a 2- to 3-per-cent price relative to assets under management (AUM), assuming a 1 per cent average fee rate.
But here's the catch. Burgundy, a firm with $27-billion in AUM, just traded at 2.3 per cent, while Lorne Park, with $3.9-billion in AUM, traded at 3.9 per cent of AUM. These are full-firm transactions with sophisticated infrastructure and recognizable brands.
So, why would a large wealth management firm pay an advisor 3 per cent of AUM to buy their book when other firms are only trading at 2 to 3 per cent?
The truth is, they might. But it won't be because of an advisor's revenue multiple – it will be because of earnings before interest, tax, depreciation and amortization (EBITDA). Buyers are focused on what your business earns, not just what it brings in. If your practice generates strong margins, recurring cash flow, and has low advisor/key-person risk, it might justify a premium. If it doesn't, even 2 per cent of AUM may be a stretch.
Firms with strong EBITDA margins, scalable operations and sticky client relationships are trading at 10 to 15 times EBITDA even if the AUM multiple looks modest. But for those running a lifestyle practice, in which profits are drawn down annually and the business revolves around a single advisor, then even a two-times revenue multiple may be generous.
If you're an advisor or firm principal considering the next chapter – be it succession, retirement or recapitalization – now is the time to understand how buyers are evaluating value. Multiples are a starting point, not a finish line.
The Canadian wealth industry is entering its next phase. Buyers are sitting on the sidelines, ready to act. However, value creation and capture belong to those who look beyond the headline metrics and focus on building enduring, cash-generating businesses.
The lesson from Burgundy is simple. Succession is not optional; it's a matter of timing. The difference is whether you drive the process or respond to it.
Joe Millott is a partner at Fort Capital Partners, an independent investment bank that specializes in wealth and asset management mergers and acquisitions, with offices in Vancouver, Calgary and Toronto.