While two-thirds of advisors have been using generative AI to summarize meetings, automate administrative tasks, draft client messaging and streamline workflows, few RIA owners have considered how AI will affect their firm’s value. The good and bad news is that AI will, in fact, impact your RIA’s valuation. The question is not if, but when.
Don’t Just Use AI Tactically, Think Strategically
At a tactical level, repetitive tasks that previously consumed advisors’ time, including meeting notes, compliance documentation, and scheduling, are now easily completed by AI. Leading firms are also using AI to become more responsive and better informed by organizing institutional knowledge, streamlining internal processes, and improving communication across teams. This is underscored by the recent introduction of Anthropic’s advisor-focused AI agents. All of this has become table stakes, and firms that successfully implement these tools are able to operate more efficiently, leading to stronger margins and higher valuations.
Strategic Industry Implications of AI: The Gap Will Widen Between Large and Small Firms
While AI will benefit firms of all sizes, the valuation benefits will not be distributed equally.
Despite tactical advantages, AI will not level the playing field between larger and smaller firms. Instead, it will continue to widen the gap. Advisory firms with more than $25 billion in AUM already have a significant head start. Due to their dedicated resources and deep bench of talent spanning compliance, marketing, investment research, technology, and operations, larger firms are miles ahead, and their ability to reinvest larger and larger dollars each year into AI will only amplify those advantages. And it’s not just the dollars; larger firms have more internal resources to train, refine, and govern agentic AI tools in ways that smaller firms will find impossible to match.
Bottom line: the scale gap between big and small is widening at an accelerating pace. If you are sub-scale, you are falling behind.
Pressures Will Continue to Mount
That’s not to say that smaller independent firms cannot still succeed, but their path will certainly narrow due to the cost of investment required to successfully implement these tools. Meanwhile, AI will create more cybersecurity challenges. In fact, 68% of executives believe generative AI will significantly increase the sophistication of cyberattacks. Smaller firms that lack a dedicated cybersecurity team, and the budget to build one, will be at risk of sophisticated threats, while larger firms can invest in robust cybersecurity programs and develop in-house expertise. One data breach could obliterate a small RIA, while a large firm has the necessary resources to address the situation and quickly move forward.
At the same time, customized financial advice is literally at the client’s fingertips, and their expectations are evolving. I anticipate we’ll see a growing number of clients question whether they need to pay their advisor a full fee for services they can perform themselves with AI. Offerings such as complex estate planning, multigenerational wealth transfer, and tax optimization will be more difficult for artificial intelligence to replicate and firms which offer these and other services will in effect have a protective moat around their clients that smaller firms will not have.
Ask yourself: If I am only providing investment management and a financial plan, how viable is my business long-term as AI proliferates in our industry? And if building out a broader service suite is what it takes to remain competitive, can you realistically get there on your own, or does joining a firm that’s already there make more sense?
What This Means for Valuations
I believe buyers will continue to have strong interest in firms with attributes such as strong organic growth, second-generation leadership, tax and family office services, and diverse leadership teams and RIAs serving ultra-high-net-worth clients will be relatively well-positioned to maintain higher valuations.
By contrast, firms serving fewer complex clients could face more direct disruption from AI, creating significant strategic considerations for smaller-firm owners evaluating succession and liquidity options.
The Path Forward
What AI may ultimately change is not whether advisors remain relevant, but how clients and buyers perceive value. For example, AI will create fee pressure as clients look for their advisor to either provide more services for the same fee, or the same basic services for a lower fee. This has obvious implications for cash flow and margins and a direct correlation to your firm’s value. In the coming years, AI may not simply change how advisory firms operate, but it may fundamentally change what they are worth.
If you are an RIA owner, now is the time to understand how AI may affect your firm’s value. The good news: there are good options today that will allow you to tap into the scale that is needed to thrive without sacrificing what you’ve built for your clients and team. Partnering with an investment banking firm that specializes in wealth management can help start the conversation about your firm’s valuation and provide a benchmark analysis to understand where you stand in the market.