Planning to sell your RIA firm? Now may be the time to act

How to leverage benchmarking to grow your RIA firm | Elevate CPA Group

Out of the trends that have emerged over the past year, this one stands out: An increase in demand for purchasing RIA firms. As a result, RIA firms are selling at increased multiples—and at a greater frequency—than in recent years. In fact, boutique investment bank Echelon Partners estimates there will be a record-breaking 287 transactions in 2021 alone. 

If you’re planning to take advantage of market conditions and sell your RIA firm, it may be wise to move quickly. Here’s what you should know. 

We could see a tax increase on high earners.  

President Joe Biden recently debuted a $1.75 trillion framework for his climate and social spending bill that will be paid for, in part, by a 5% surtax on individual income above $10 million. The surtax increases to 8% for individual income above $25 million. 

The sale of your RIA firm could land you in one of these high-earner brackets. There’s also been talk of a capital gains tax increase, too. Either way, once the bill goes into effect, you could take a significant tax hit on the sale. 

We don’t know when the bill will be signed into law.

At the time of this writing, we don’t know when the bill will become effective. For this reason, if you’re planning to sell your RIA firm, consider getting a purchase agreement in place as soon as possible. 

Even if you don’t close until 2022, you could sign your purchase agreement now. If the purchase agreement date falls outside of the bill’s effective date, you shouldn’t be subject to the surtax or increase in capital gains tax.

Time is of the essence. 

The RIA firm seller’s market is strong. If you’re planning to sell your firm, now may be the time to act. Getting your purchase agreement in place before any tax increases go into effect could allow you to make the most of your decision.  

To help you prepare for a sale, Elevate can assist your firm with preparing financial statements. We can also run tax projections so you can weigh the tax implications of the transaction. 

In the meantime, we’ll be closely following these legislative developments. If you have questions about how this bill could impact your plans to sell, contact us today.