Solo RIAs are the succession blind spot the M&A boom leaves open

The registered investment advisor M&A boom shows no sign of slowing, but the deal flow describes a market most independent advisory practices will never enter: as InvestmentNews reports, most independent advisors are not selling to a consolidator at all, and the typical practice is a solo or small-team shop with no next-generation partner, no internal buyer and no timeline for what happens when the founder leaves.

InvestmentNews frames that pattern as the industry's biggest blind spot even as firm valuations climb, and for a solo shop the issue is more fundamental than paperwork lagging behind a healthy practice: the practice is the founder, with client relationships, institutional memory, decision-making and the trust that keeps revenue in place all concentrated in one person. A transition therefore needs a buyer at exactly the moment the firm is least able to present itself as a business.

That concentration is visible from outside, and buyers factor it into their numbers: the consolidation wave rewards practices that made themselves transferable, teams with multiple principals, documented workflows and relationships that survive one person's departure. The solo practice without a plan may have the same revenue today, but its value on an unplanned exit day is a different figure, and the spread between the two is the real cost of deferred succession.

Mike Papedis, founder and CEO of Fusion Financial Partners, calls it key-person dependency: one person owns the client relationships, makes every key decision, holds the institutional knowledge and is the person clients trust. When that is the case, the firm operates as a job with a book attached, and nothing about that structure changes simply because the owner wants to sell someday.

The same dependency shows up in other ways. There may be no identified successor, no buy-sell agreement and no standing arrangement with another advisor in the founder's network to take over if needed, and as retirement approaches, Papedis says, founders often quietly stop reinvesting in technology, people and growth, so the firm starts to look like a wind-down before anyone has spoken the word.

Papedis tests owners with a question that works any morning: if the founder cannot come into the office tomorrow, who runs the firm? An answer that is not immediate and specific marks the place where work has to begin, and for a solo RIA that hypothetical captures the enterprise-value conversation in a sentence.

An unplanned exit without a buyer turns an orderly process into triage: clients do not know who their advisor is, employees do not know whether their jobs survive, and a spouse, family member or estate can find itself running or winding down a business it never expected to manage. Across the table, prospective buyers negotiate against a fast-depreciating asset, and Papedis says enterprise value can evaporate quickly, removing the value the founder spent decades creating.

The client relationships make the failure more than an owner problem, because many small RIAs hold clients who have been with the founder for 20, 30 or more years, Papedis says, people who trusted the advisor through their earning years and now need the same judgment for retirement, estate and family decisions. They are asking who will take care of them when the advisor retires, and Papedis says clients deserve an answer that is not an introduction under emergency conditions.

The first step he recommends does not require a deal. Build a continuity plan today: identify an external advisor or firm that could step in during an emergency, document the processes and vendor relationships so nothing of consequence lives only in the founder's head, and settle on a reasonable valuation before working backward from a likely retirement horizon, because the valuation is the part that forces honesty about whether the practice can be handed over while it still has value.

The continuity arrangement may never become a sale, but its immediate job is to keep the practice alive and priced as a going concern on the days the founder cannot be at the desk, and to give an eventual transition the time to be deliberate instead of desperate.

Founder-led exits are becoming the currency of RIA M&A, and owner seats are now part of the price. That currency is available only to a founder who has made the seat occupiable, and the solo RIA's version of that seat is a continuity plan with a name on it and a valuation attached. The consolidator market has made succession more urgent and the unprepared solo book easier for buyers to discount, and until a founder can put a specific name on the plan, the valuation that matters is not today's market multiple but the one a successor will negotiate when the founder is no longer in the room. The work starts with a piece of paper, a vendor list and a name.