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Beyond AUM: The Nuances of Practice Valuation

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  Published in Business and Finance on Saturday, January 17th 2026 at 21:28 GMT by The Globe and Mail

The Valuation Challenge: Beyond Assets Under Management

Mr. Wirth's recent experience underscores that determining the appropriate price for a practice is far more nuanced than simply calculating a multiple of assets under management (AUM). While AUM and recurring revenue are foundational metrics in any valuation, a truly comprehensive assessment must delve deeper, taking into account client demographics, the overall health of the practice, and crucially, the why behind client retention.

"The biggest challenge is always valuation," Mr. Wirth states, reflecting on his recent acquisition. His approach involved a meticulous process that went beyond standard industry practices. Initially, a preliminary valuation was established using a multiple of recurring revenue, a common starting point in these transactions. However, this was then significantly adjusted to account for intangible factors that contribute to a practice's overall value - namely, client loyalty and the potential for future growth.

Understanding Client Loyalty and Service Quality

The key differentiator in Mr. Wirth's strategy was a deep dive into understanding the reasons clients remained with the practice. It wasn't just about how many clients there were, but why they stayed. "We had to understand why those clients were with the practice," he explains. This necessitated an evaluation of the practice's value proposition, the quality of service provided, and the level of personal connection established with the clients. A book of clients acquired simply based on AUM could prove problematic if the underlying reasons for their loyalty weren't transferrable to the acquiring advisor.

Mitigating Transition Risk Through Transparency

Beyond the financial aspects, the potential impact of the transition on the client base was a critical consideration. A successful acquisition requires more than just a fair price; it demands client buy-in. Mr. Wirth's strategy prioritized client comfort and continuity of service. He and the retiring advisor were highly transparent with clients, clearly explaining the advisor's retirement plans and outlining how the new arrangement would ensure continued high-quality service. This proactive and honest communication helped alleviate concerns and foster trust.

Communicating Pricing and Ensuring Fairness

Transparency wasn't limited to the clients. Mr. Wirth also placed significant emphasis on communicating the pricing model to the selling advisor. He detailed how the valuation was derived and articulated his rationale for the offer, reinforcing the intention of reaching a fair price for both parties. This open dialogue helped build trust and ensure the selling advisor felt valued and understood. "It was important for the seller to understand that we were not trying to lowball them," he emphasized. "We were trying to find a fair price that would work for both parties."

The Key Takeaway: Open Communication is Paramount

Mr. Wirth's experience demonstrates that acquiring a client book isn't merely a financial transaction; it's a delicate process involving significant human elements. The successful acquisition relies on a thorough valuation process, a deep understanding of client relationships, and above all, a commitment to transparency and open communication. By addressing potential concerns head-on and prioritizing fairness, advisors can navigate the complexities of these transactions and secure a valuable asset - a book of loyal clients. As Mr. Wirth aptly concludes, "The key is to be transparent and to be willing to have difficult conversations."