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The Ultimate Guide to Merging Two Independent Wealth Managers

Independent wealth managers face rapid change. Regulatory pressure grows. Client expectations rise. Competition intensifies. Because of this, many firms are exploring consolidation and strategic moves in wealth management. A merger offers scale, stronger governance, and a more resilient business model. However, every merger carries real risk. Success depends on disciplined valuation, aligned incentives, cultural fit, and precise execution.

This guide explains how a merger between two External Asset Managers (EAMs) works in practice. Designed for the Swiss market, it also captures the rise of independent wealth managers as a modern hybrid of private banking. Along the way, you see realistic numbers, clear steps, cultural insights, regulatory considerations, and practical integration tactics. Moreover, the style stays active, concise, and well-structured. As a result, you gain a complete and actionable blueprint for a successful EAM merger.

Why Consolidation Accelerates in Independent Wealth Management

Wealth management changes fast. Costs rise due to compliance and technology. Digital expectations increase. Clients demand more advice, transparency, and access. Therefore, many teams explore mergers to strengthen their position. A merger helps both sides combine expertise, stabilise revenue, and reduce fixed costs. It also protects firms against succession gaps and regulatory complexity. At the same time, the Swiss market sees more wealth managers and fewer traditional banks, which makes positioning even more critical.

In this environment, independent firms must understand their strategic choices. They can grow organically. They can partner. Or they can join forces through a merger. This guide focuses on the third option: a well-planned merger between two EAMs.

The Main Reasons Why Wealth Manager Mergers Fail

Many mergers fail for predictable reasons. Culture receives too little attention, so key issues appear later. Retention gets assumed rather than tested. Synergy forecasts often look too optimistic. Compensation alignment happens too late, which triggers frustration. RM autonomy also falls under pressure. In addition, valuation models rely on simple multiples instead of modelling retained revenue and profitability beyond pure AUM. These patterns create tension and erode trust. As a result, clients and advisers may question the merger and decide to leave.

Another common issue appears around client loyalty. Clients stay with firms that communicate clearly and keep a strong service culture. They also stay when trust remains intact. You can see how crucial this is in discussions about client loyalty in private banking and wealth management. A merger must strengthen this trust, not weaken it.

A Clear Example: Merging Two Swiss EAMs

Let us look at a real, practical model. This example mirrors everyday situations in the Swiss EAM market and the broader universe of Swiss wealth managers. Two firms decide to merge to gain scale, stability, and a more attractive platform for RMs and clients.

Firm A: Structured and Process-Driven

• AUM: CHF 500 million
• Fee: 0.8%
• Revenue: CHF 4.0 million
• Payout: 50%
• Costs: CHF 1.2 million
• EBITDA: CHF 0.8 million

Firm B: Entrepreneurial and RM-Centric

• AUM: CHF 300 million
• Fee: 1.0%
• Revenue: CHF 3.0 million
• Payout: 70%
• Costs: CHF 0.5 million
• EBITDA: CHF 0.4 million

Combined baseline: CHF 800 million AUM, CHF 7.0 million revenue, CHF 1.2 million EBITDA. This baseline shows what the market currently pays for. It also sets the starting point for any merger valuation.

Step 1: Model Real Retention

Client loyalty defines everything. Clients follow their relationship manager (RM). In practice, RM behaviour and payout structures strongly influence retention, as seen in discussions around RM payouts linked to turnover. Therefore, you must test several retention cases. Do not assume 100 per cent retention. Many mergers lose 10-30% of AUM in the first year.

In this model, Firm A retains almost all assets. Firm B maintains around 80 per cent. Retained AUM falls from CHF 800 million to CHF 740 million. Retained revenue falls from CHF 7.0 million to CHF 6.4 million. This shift shows why realistic assumptions matter more than optimistic stories.

Step 2: Align the Payout Model

Advisers expect fairness. Two payout structures create conflict, politics, and frustration. A merger works only when all advisers follow one rule. In this case, both firms choose a 60 per cent payout. This uplift motivates Firm A. It reduces pressure on Firm B. It also supports long-term stability and keeps the firm competitive in the Swiss wealth management compensation landscape.

New total payout: CHF 3.84 million. Previous combined payout: CHF 4.1 million. The merger creates clear cost synergies without undermining RM’s motivation. Still, management must manage expectations and avoid hidden resentment in the RM team. The softer side of this topic appears in reflections on challenges faced by relationship managers at independent firms.

Step 3: Build the Combined Cost Structure

A merged firm removes duplicated roles and systems. It reduces rent, software, vendor contracts, and compliance work. It also has a chance to rethink tooling and consider modern CRM and PMS systems in Swiss wealth management. After merging, total operating costs drop from CHF 1.7 million to CHF 1.3 million. This reduction strengthens the margin and creates room for reinvestment.

Many independent firms use this moment to upgrade infrastructure. They review portfolio management tools, reporting, onboarding journeys, and digital channels. Some also explore new solutions or even AI-based tools, similar to the themes in AI in independent wealth management. A merger can thus be both a structural and a technological reset.

Step 4: Calculate Post-Merger EBITDA

Let us summarise the model. Retained revenue: CHF 6.4 million. Payouts: CHF 3.84 million. Operating costs: CHF 1.3 million.

Result: Post-merger EBITDA = CHF 1.26 million.

The merger adds value. The increase is modest but stable. It takes EBITDA from CHF 1.2 million to CHF 1.26 million. However, poor integration can quickly destroy this uplift. Therefore, leadership must protect RM retention and client relationships at all times.

Detailed Valuation Example: How to Calculate Each Firm’s Value and the Final Shareholding

To understand how an ownership split emerges in an EAM merger, you need a clear valuation model. The logic should link directly to EBITDA, risk, and synergy. Below, we walk through a realistic but straightforward method that many independent wealth managers can apply.

Step 4.1: Normalise Stand-Alone EBITDA

We start with the pre-merger EBITDA figures:

• Firm A EBITDA: CHF 0.8M
• Firm B EBITDA: CHF 0.4M
• Total stand-alone EBITDA: CHF 1.2M

These figures already include existing payouts and costs. They reflect how each firm performs today. However, market valuations also consider firm size, growth, and key-person risk.

Step 4.2: Apply Appropriate EBITDA Multiples

Typical market ranges for small independent wealth managers:

• Larger, stable EAM: around 6.5×–8× EBITDA
• Smaller, RM-dependent EAM: around 4.5×–6× EBITDA

In this example, we choose:

• Firm A multiple: 7× (larger and more structured)
• Firm B multiple: 6× (smaller and more RM-dependent)

Now we calculate enterprise values:

• Firm A valuation: 0.8M × 7 = CHF 5.6M
• Firm B valuation: 0.4M × 6 = CHF 2.4M
• Combined stand-alone value: CHF 8.0M

This combined value represents the “no merger” universe. Any merger should aim to beat this number after synergies are factored in.

Step 4.3: Value the Merged Entity

From the earlier model, post-merger EBITDA (base case) equals CHF 1.26M. A larger, better-structured firm usually deserves at least the exact multiple of the stronger stand-alone entity. Here, we keep a conservative 7×.

• Merged entity value: 1.26M × 7 = CHF 8.82M

The merger, therefore, creates:

• Synergy value: 8.82M − 8.0M = CHF 0.82M

Roughly 10 per cent extra enterprise value. This uplift is meaningful if both partners share it fairly and protect it through strong integration.

Step 4.4: Base Ownership Split from Contribution

We now calculate each firm’s share of the combined stand-alone value:

Pure economic logic suggests a 70/30 ownership split in favour of Firm A. This mirrors their relative value contribution to the merged platform.

Step 4.5: Scenario Analysis – Best, Base, and Worst Case

The true strength of any merger model lies in its sensitivity tests. We now change key assumptions: retention and payout.

EBITDA reaches CHF 1.4M in the best case. The base case delivers CHF 1.26M. In the worst case, EBITDA decreases to CHF 0.57M, well below the original CHF 1.2M. As a result, the comparison highlights how quickly a merger can weaken when retention or payout shifts. Therefore, firms must track these two variables closely during integration.

Step 4.6: Earn-Out Structure Example

To protect against downside and reward strong execution, many EAM deals use earn-outs. They link a part of compensation or share transfer to future retention or EBITDA.

One simple model:

• Base share split at closing: A 65%, B 35%
• After 24 months, if total AUM ≥ 780M and EBITDA ≥ 1.3M:
• → Firm B founders receive an extra 3–5% equity

This structure:

• Protects Firm A from paying full value for assets that might leave
• Rewards Firm B for strong retention and growth
• Aligns both sets of partners around integration and client care

Step 4.7: Cash Acquisition vs Merger-of-Equals

You can also compare a pure cash acquisition with a merger-of-equals structure:

Independent wealth managers often prefer a merger-of-equals approach. It fits entrepreneurial cultures and long-term value creation. It also reflects how many RMs think about their platform, especially when they compare boutique vs. platform-style independent wealth management.

Step 4.8: Valuation Waterfall Summary

You can summarise the entire logic as a simple “valuation waterfall”:

1. Start with stand-alone EBITDA for each firm.
2. Apply realistic multiples to get stand-alone values.
3. Model retained revenue, payout, and costs post-merger.
4. Calculate post-merger EBITDA and apply a merged-firm multiple.
5. Measure synergy value (merged value minus stand-alone total).
6. Split base ownership by stand-alone contribution.
7. Adjust for risk, leadership role, and special assets.
8. Add an earn-out to protect both sides and align behaviour.

With this waterfall, both firms can discuss numbers calmly. They see how retention, payouts, and synergies translate into equity. This supports rational negotiation instead of emotional debate.

Step 5: Define a Fair Ownership Split

Valuation must reflect contribution and risk. Firm A delivers most of the profit and stability. Firm B brings entrepreneurial energy but a higher retention risk. A fair ownership split in this example sits at 65 per cent for Firm A and 35 per cent for Firm B. This structure rewards existing profitability while still valuing growth potential.

You can refine this split with scenario analysis. For example, use different retention levels, payout options, and growth plans. Then you anchor negotiations in numbers, not in emotion. This structured thinking aligns with a broader strategic resilience mindset in wealth management.

Step 6: Treat Culture as a Strategic Asset

Culture drives client experience. It shapes decision-making. It defines adviser behaviour. A structured firm and an entrepreneurial firm follow different norms. Therefore, leaders must align values, incentives, and workflows early. They must also secure key RMs with clear retention packages and attractive roles.

Here, communication plays a central role. Clear internal and external messages reduce fear and speculation. Firms that communicate well often outperform others, as seen in broader reflections about the power of communication in wealth management and private banking. A merger offers a chance to reset communication culture and build real leadership credibility.

Step 7: Follow FINMA and FIDLEG Requirements

Swiss mergers require regulatory precision. A new entity triggers updates to client agreements, advisory documentation, client segmentation, and KYC processes. It also requires proper communication with the supervisory organisation and custodian partners. For many firms, this links to existing work around cross-border regulation and independent wealth managers.

In parallel, firms must review their custodian bank setup. A larger merged entity might seek better terms, more robust platforms, or additional booking centres. At this stage, it helps to revisit the key factors in selecting a custodian bank. A merger creates new bargaining power but also new expectations from partners.

Step 8: Use a Strong Integration Plan

A merger becomes real only when integration begins. You need a clear roadmap for the first 100 days and the first 12 to 24 months. The plan should cover clients, RMs, operations, IT, governance, and culture.

• Lock in key advisers with clear incentives and defined roles.
• Inform all clients with a confident, client-centric message.
• Align processes under one compliance framework and one client journey, similar to modern views on the client journey in wealth management.
• Unify systems, reporting, and fee schedules across all client segments.
• Monitor AUM retention monthly and act fast if trends weaken.
• Reinforce the new culture through leadership behaviour and daily routines.

Well-executed integration turns a merger from a legal event into a real strategic advantage. Poor integration does the opposite and can damage a previously healthy business. This is why many EAM leaders prepare early and treat integration as a core project rather than an afterthought.

Conclusion: A Successful Merger Needs Clarity, Discipline, and Leadership

A merger between independent wealth managers creates value when both firms align incentives, protect client relationships, and integrate culture with intention. Numbers shape the model. Culture drives the outcome. With explicit assumptions, strong leadership, and disciplined execution, a merger can deliver absolute scale and long-term stability.

At the same time, a merger also changes how firms position themselves in a market where independent wealth managers often remain best-kept secrets. A well-executed deal can transform that. It can create a visible, credible platform that attracts clients, talent, and partners. When done right, the merger becomes more than a financial transaction. It becomes a real step forward in the evolution of the business and long-term investment success for all stakeholders.