Back when my son got his first car, he was obsessed with the idea of resale value. I wish I could say it was a practical, modest sedan that he researched thoroughly, but no—he wanted something flashy. So, he scrolled through listings, focused on what looked cool, and ignored things like mileage, maintenance history, or the fact that the transmission had “quirks.” He thought the shiny paint and loud exhaust system told the whole story.
Fast forward two years: when he tried to sell it, the buyers weren’t impressed by the “killer stereo system” or the Instagram-worthy selfies he’d taken leaning against it. They wanted to see service records. They cared about how many miles were left before the timing belt gave out. They were asking about fuel efficiency, not bass response. His valuation model—“does this car look awesome in my driveway?”—was a little outdated compared to the market.
Advisory practices fall into this same trap. For years, valuations were dominated by one shiny number: AUM. Assets under management were the equivalent of my son’s glossy paint job—easy to show off, but not always telling the real story. Today’s buyers are savvier. They’re looking under the hood.
Here’s the reality: AUM still matters, but it doesn’t carry the weight it once did. Legacy valuation models focused on assets or trailing revenue because, frankly, that was all anyone knew how to measure. But the advisory economy has evolved. With private equity circling, roll-ups accelerating, and competition heating up, buyers aren’t just paying for size—they’re paying for sustainability, profitability, and scalability.
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And here’s the problem: if you’re still talking about your firm’s value in terms of “we manage X million in AUM,” you’re about as compelling as someone trying to sell a used car by bragging about its cupholders. The market wants proof of efficiency, growth levers, and client stickiness. Without those modern metrics, you risk being undervalued—or worse, overlooked entirely—when it’s time to transact.
Think about what’s happening in other industries. Streaming services like Netflix and Disney+ aren’t valued just by subscriber count anymore. Wall Street wants to know churn rates, customer lifetime value, and average revenue per user. It’s not “how many people signed up last quarter,” but “how many are still paying three years later?” Advisory practices are no different. If you’re not tracking the right metrics, you’re playing yesterday’s game.
So what do buyers actually care about now? Clean data. Predictable revenue. Forward-looking KPIs that paint a picture of operational health. They want to know your CAC (client acquisition cost)—and ideally, see that you’re reducing it through automation and marketing leverage. They’re looking at productivity per advisor to see if your team is scalable or already maxed out. And client lifetime value? That’s the holy grail. It signals not just what you’ve earned, but what you’re likely to earn in the years ahead.
Peter Drucker famously said, “If you can’t measure it, you can’t improve it.” In today’s M&A market, I’d add: “If you can’t measure it, you can’t sell it for what it’s worth.”
The firms getting top dollar aren’t necessarily the ones managing the most money—they’re the ones managing their data, their processes, and their client relationships with precision. They can demonstrate efficiency. They can prove scalability. They can point to metrics that make future cash flows look like a sure bet, not a guess.
For you, the independent advisor, this isn’t just about some hypothetical exit ten years from now. It’s about building a firm that’s healthier, more profitable, and more attractive today. By tracking the right numbers, you don’t just increase your valuation—you improve your margins, strengthen your client experience, and free up time to focus on strategy rather than scrambling.
So, take it from a dad who watched his son learn the hard way: the shiny stuff might get attention, but the fundamentals close the deal. Start measuring what matters, because buyers already are.
The future belongs to advisors who understand that managing more isn’t enough. Measuring better is where the real premium lies.
