Despite sky-high valuations for advisory firms and enticing offers from private equity and other outside investors that would net them millions of dollars from a sale, a resolute group of owners of enterprise registered investment advisor firms is determined to hold out and remain 100% employee owned.
The holdouts are bucking a powerful trend. All of the 10 largest RIAs on Barron's 2026 Top 100 RIA Firms have outside stakeholders. Buyers backed by private equity made more than three-quarters of RIA acquisitions in the second quarter, according to Echelon Partners. The number of firms backed by private equity increased 16% last year, and PE-backed firms now control around one-quarter of total industry assets under management, according to AdvizorPro research.
Undaunted, enterprise employee-owned firms are fighting back -- and perhaps fighting for their lives.
Led by Rob Francais, CEO of Los Angeles-based Aspiriant Wealth Management, around 20 employee-owned firms with at least $3 billion in AUM have held two "summit" meetings in the past year and plan a third in February in Scottsdale, Ariz. Francais hopes to launch a formal alliance of employee-owned firms in July.
"We want to share and collaborate," Francais said. "We want to be stewards for the fiduciary standard and strengthen and advance the employee-owned model."
Achieving scale is a perennial problem for employee-owned firms, and Francais very much sees a formal alliance, which he envisions as a not-for-profit akin to a professional standards board or trade group, as a vehicle for like-minded firms to get to know each other and merge if they see the benefits.
In fact, owners of Greenspring Advisors in Towson, Md., and Wealthstream Advisors in New York City took advantage of the first gathering of employee-owned firm in Park City, Utah, last summer to complete details of a merger they consummated several months later.
Succession issues. The biggest challenge facing employee-owned firms is ownership succession. The soaring valuations of RIA firms have made it prohibitively expensive for younger employees to buy out current shareholders.
"The law of absolute numbers makes it very difficult for the math to pencil out," says John Furey, managing partner of Advisor Growth Strategies. "Even using lower internal valuations, RIAs are still incredibly more valuable now than in the past, interest rates are rising, and productivity gains from AI will only increase firm valuations."
Executives at employee-owned firms say that while determining the discount they must extend to internal shareholders isn't easy, neither is it an existential threat.
For starters the nominally high multiples of a private-equity offer can be deceiving, maintains Eric Kittner, chief executive of St. Louis-based Moneta, a $50 billion-asset employee-owned firm. "The devil is in the details," Kittner says. "What growth targets are being required? How much of the sale offer is in cash? What is the value of the acquiring firm's equity?"
The value of remaining independent goes beyond dollars, Kittner says, but when determining an internal sale price, "if the buyer feels like they paid too much and the seller believes they're getting less than they should, that's probably the best solution."
Ownership succession has been the most popular topic by far at the meetings of employee-owned firms to date, and firms have been happy to share their models, according to Francais. "There's no secret sauce," he says. "It's a puzzle that involves shared sacrifice. We're trying to create a path to show that internal transfer of shares is not only possible but worthwhile."
Benefits of outside capital. But can the holdouts compete with scaled enterprise firms backed by a torrent of outside capital?
Providing access to capital for growth and succession planning has been crucial to RIAs' embrace of outside investors. Private-equity investor TRIA has provided Modera Wealth Management with the capital to grow via acquisitions, invest in talent, and allow retired shareholders to sell their stock, says Modera CEO Tom Orecchio.
Savant Wealth's minority investors Cynosure and Kelso have been "outstanding partners," says Brent Brodeski, CEO of Savant Wealth Management, bringing "significant resources, expertise, and relationships that have allowed us to grow exponentially without sacrificing excellence."
The downside of 100% employee-ownership, as Brodeski sees it, is not having "access to capital required to grow at a healthy rate" and needing to "significantly discount equity when selling it to the next generation."
The need for outside capital is overstated, counter employee-owned firm executives.
With 9,000 clients, 65 employees, and approximately $50 billion in assets, Moneta generates enough free cash flow to "reinvest in the business as needed," Kittner says. RIAs have been able to grow rapidly over the past 30 years "without a lot of outside capital, but with a tremendous amount of human capital," Francais notes.
Strings attached? Employee-owned firms also point to the demands that private-equity firms can place on RIAs to ensure they get a desired return on their investment and the limited time, usually five to seven years, that they remain investors.
"What will you have to do differently to satisfy an outside investor's expectations?" Francais asked. "That can be a big liability."
But outside investors would be foolish not to align with the best interests of a firm's clients and employees, says Rob Mooney, CEO of Snowden Lane, which bought back 40% of its private-equity investor's stake last year, leaving employees with ownership of half the firm.
"I'm not in the camp that says outside capital is conflicted because they want a return," Mooney says. "If you don't take care of your clients and your people, your firm is not going to yield a return. Inside capital also wants a return. They want the equity to appreciate in value as well."
Next year is likely to be an inflection point for employee-owned firms. The odds of 100% employee-owned firms surviving as viable enterprise competitors over the next five years are "extremely low," Furey says. "Capital and technology advance will only compound the low probability. All enterprise firms will have a capital partner."
But a formal alliance and trade association could provide the heft needed for employee-owned firms to be able to hold their own in a business that is rapidly consolidating, executives at these firms say.
"What I've seen at the summit meetings has been eye-opening," says Simone Gehner, chief compliance officer and a shareholder at TCI Wealth Advisors. "There's been a willingness to share and sense of community, that 'you're not in this alone.' I'm very optimistic."
"If this group sets the right expectations, I think it could be a huge success," says Brandon Kawal, partner at Advisor Growth Strategies. "The reality is the industry needs this type of tension because many will want a multigenerational approach and need like-minded people to collaborate. A full change-of-control transaction isn't the only option out there for firms that plan ahead."
The lure of private equity. For all the good intentions of a formal alliance of employee-owned firms, Simone worries that tempting sale offers may be hard to resist. "It's those numbers out there," she says. "It's easy to get blindsided by the multiples."
Kittner reminds his colleagues they own an asset that has continually appreciated for more than a decade. "If I had sold 10 years ago, I wouldn't have been paid enough," he says. "Why would I feel different in another 10 or 15 years?"
Francais, who is writing a book about employee ownership, is convinced an alliance of firms willing to collaborate is critical for the holdouts to succeed.
"Private equity isn't the villain of the story," he explains. "They are solving a problem that the industry failed to solve for itself. By joining forces, employee-owned firms can achieve scale that benefits clients, employees, and owner. And scale and employee ownership is the best of both worlds."
Write to advisor.editors@barrons.com
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