Is The Rollup Model Dead?
I had a conversation recently with Kyle Campbell, SVP of Corporate Development at OneDigital. He’s also a Certified Valuation Analyst who has closed nearly 500 M&A transactions in the wealth management industry. He made a pretty direct argument during our interview: the historical rollup model is dead.
(You can watch the full interview here on YouTube)
That is a significant statement from someone who has been on the inside of this market for the better part of a decade. I want to walk through his case, where I think he is right, and what the answer to that question means for advisors who are thinking about a sale in the next five to ten years.
First, How the Rollup Model Actually Worked
For about fifteen years, this was the playbook:
Private equity backs a platform firm. That firm acquires smaller practices, often overpaying relative to what the economics justify on a standalone basis.
Scale is the product. The goal is not integration or operational efficiency. The goal is to get big enough that the next buyer up the chain will pay a higher multiple for the larger entity.
Repeat until exit. IPO, strategic sale, or another PE firm takes it off your hands at a premium. The model works as long as there is always a bigger buyer willing to pay a higher multiple at every level of the chain.
Focus Financial was probably the most visible firm running this model. It worked for a long time. Kyle's argument is that it has run out of road.
The Writing On The Wall
A few things converged that make a compelling argument:
The multiples became unsustainable. Kyle cited RIAs trading at twenty-three times EBITDA. Think about what trades at that multiple in public equity markets: the top fifty securities in the world. There is no buyer pool that can sustain that across an entire industry.
The cost of capital changed. The cheap money that made overpaying for acquisitions rational is no longer cheap. The math that worked at two percent interest does not work the same way at five.
PE hold periods nearly doubled. What used to be a four to five-year flip is now bordering on twice that. The speed of the chain has slowed down significantly, which changes the return profile for everyone involved.
The integrators are replacing the aggregators. The next version of this market appears to be firms that actually have to build something operationally durable: real integration, real synergies, real infrastructure, not just scale for its own sake.
The Problem That Has Not Hit Yet
Regardless of where you land on the rollup question, here is the part of this conversation that I think matters most for advisors thinking about their own succession timeline.
A significant number of advisors who would have sold in the last few years have not. Markets have been exceptional. Revenue is up. Clients are not calling to complain. The business feels healthy, even if the advisor is effectively working 30 or 40 hours a week in a very favorable tailwind. There has been no forcing function to make the succession conversation urgent.
When the forcing function comes, like a meaningful market correction, a compliance change, a health event, or just the accumulation of years, a lot of those advisors are going to hit the market in a short window. What happens when supply increases rapidly in a market where the buyer pool is already under pressure:
Valuations respond to supply. More sellers competing for the same pool of qualified buyers means less negotiating leverage for each individual seller.
The best buyers get selective. Integrators who actually have to make the acquisition work operationally cannot buy everything. They get more deliberate about what they take on.
The window that exists today does not look the same in five years. The industry is not going away, but the conditions that currently favor a well-positioned seller are not permanent.
What Does This Mean For You
I can’t encourage you enough: on your next lunch break, watch or listen to the interview with Kyle. He is articulate and challenging, and he speaks from first-person experience. Worthwhile.
Now, my disclaimer: this is not a call to sell before you are ready. Rushing a succession decision to chase a market window is its own version of the urgency problem, and I have written about what that costs.
What it is: a reason to have the conversation now, while your business is healthy, while the market is favorable, and while you have enough time to be selective about who you sell to and on what terms. The advisors who achieve the best succession outcomes are those who start the conversation from a position of strength rather than necessity.
The Confidential Fit Review includes succession pathway conversations for advisors at any stage of that planning, whether you are actively exploring options or just want to understand what the landscape looks like from the inside.
If you’re trying to solve for succession in the next chapter of your business, that’s a conversation I’m here to help you solve.