All three companies are leaders in their respective fields. But when it comes to the RIA business, they are all facing major challenges in the year ahead.

Envestnet: Indispensable industry utility or unwieldy mess?
To be sure, the back office/software/TAMP and data giant has had a tumultuous year, marked by a sagging stock price, nasty attacks from an activist investor, key executive departures, an aborted attempt to go private, more acquisitions, ESG missteps and a major reorganization.

“Their many acquisitions have resulted in a lot of different enterprises,” said Mark Tibergien, the former CEO of Pershing Advisor Services. “The question people are asking is how much is tied together and what exactly is the business model?”

In an open letter to Envestnet’s board of directors last month, hedge fund Impactive Capital accused the company of “subpar performance” and “egregious spending with seemingly no accountability for returns.”

The activist investors, who have accumulated a 7.2 per cent stake in .
Indeed, the road ahead may be steep.

“We suspect that CI has paid a higher multiple for many of its wealth management acquisitions than it trades at itself,” Zachary Milam, vice president for Mercer Capital, a Memphis-based M&A valuation firm wrote in a report to clients. “Undoing that reverse multiple arbitrage is something that CI’s management hopes will happen with the spinout, but the current market environment will likely make this an uphill battle.”

Multiples for  publicly traded asset and wealth managers have declined this year, Milam noted, adding that even CI Financial CEO Kurt MacAlpine acknowledged that private market valuations have dropped “in lockstep” with the public markets.

“All of this suggests,” Milam concluded, “that achieving an attractive valuation for the US wealth management business may prove difficult.”

And if CI Financial doesn’t begin to integrate its advisory firms, its RIA venture is doomed, asserted rival aggregator Mercer Advisors, this year’s largest RIA buyer.

“The only way CI comes out smelling like a rose is with one brand,” said Dave Barton, Mercer’s vice chair and head of M&A. “If they hold the firms they bought like cats without scale or leverage they will fail.”