Each year, it gets harder to buy a book of business. Private equity played a role in nearly 76% of the RIA deals Echelon Partners tracked in the second quarter of 2026. Nothing wrong with that, but most advisors I talk to don't have private equity money, so they're bidding against it.
The price tag shows it. According to Advisor Growth Strategies, the median RIA sold for 11.6 times EBITDA in 2025, a record and up more than 40% since 2020. It's a great time to be in the RIA business.
And more of a firm's clients leave when it's sold. The Ensemble Practice found that firms that sold equity lost 8.4% of their clients in 2023, against 3.2% at firms that didn't. That's roughly 2.6 times the normal attrition.
So as buying growth gets more expensive, what is a client you bring in yourself actually worth, and how much should you be willing to spend to get one? Here's the math I have never seen anybody do.
What Is One New Client Worth to an RIA?
For a $1.5 million client at 1%, about $127,000 in lifetime gross profit, in today's money.
One new client is worth a lot more to you than you think. I'll assume you're primarily fee-only and charge 1% on the assets you manage. Let's say your average client brings $1.5 million in assets to your firm. That's $15,000 a year in revenue.
Now your gross profit margin. We use about 75%. That's gross, not net. Whenever I say that, people tell me their margin is more like 25 or 30%. That's your net. Your gross profit margin is your top-line revenue minus the cost to fulfill on the service. That might include what you pay your service staff, what you pay your TAMP, and what you pay your RIA platform if you're part of one.
So $15,000 a year at a 75% gross margin is about $11,250 a year in gross profit from that one client.
How Long Does a Client Actually Stay?
On paper, more than 30 years, but for a 60-year-old client we use 17 years to be safe.
Retention in this business is very high. Schwab's benchmarking data has shown RIAs retaining about 97% of their clients year over year for the past decade. If you annualize 97% retention, which is 3% attrition a year, a client relationship lasts more than 30 years on paper.
But if your average client is 60 years old, we use 17 years to be safe. Over 17 years, that client generates about $191,000 in lifetime gross profit.
What About the Time Value of Money?
Discount it at about 5% a year, and that $191,000 becomes about $127,000 in today's money.
You might say, Alex, that money comes in over 17 years. There's a thing called the time value of money, so how do you account for that? You can discount it by whatever rate makes sense to you, depending on your assumptions. But 5% is typically reasonable.
At 5% a year, $191,000 in lifetime gross profit per $1.5 million client is worth about $127,000 in today's money.
So every $1.5 million client you bring into an RIA that charges 1% is worth about $127,000 today. The next question is how much you should spend to get one.
How Much Should You Spend to Get One Client?
Up to about a third of that lifetime gross profit, which is about $40,000 for a $1.5 million client.
Think of it the way a private equity firm, or any other buyer, would. If they looked at how you get clients, they'd look at your lifetime gross profit per client, the $191,000. Then they'd discount it for the timing of the cash flows, to $127,000 in today's money.
They'd want to see you spend less than you make on each client, so you're not losing money. But ideally, they'd want to see about three to one: a third of your lifetime gross profit or less spent to get that client. If you spend $40,000 to get a client worth $127,000 to you, that's about 3x, and 3x is acceptable to most investors.
If you spend $25,000 to get that client, it's about 5x. At $10,000, it's about 12.7x.
The sweet spot is 3x or higher. If you're spending less than $40,000 to get one $1.5 million client, you should spend more. You're likely under-invested in marketing. Spend up to $40,000, as much as you can handle in terms of servicing. And if your cost to get a client is above $40,000, you're likely still profitable.
The number depends on the client. If your client brings $150,000, I wouldn't spend more than about $4,000 to get them. If your client brings $1.5 million, I'd spend up to $40,000.
What Goes Into That $40,000?
Everything. It's an all-in acquisition cost, including sales and marketing: your ad spend, your agency fee, and sometimes your business development team too. If you're paying a business development person, take their salary, divide it by the clients they bring in, and add that to the cost.
And $40,000 is not the target. We don't want to expect to be at $40,000. We want to be as low as humanly possible, and for a lot of clients it's a lot lower than that. We do everything we can to drive it down. But you start with the expectation that even if it costs $40,000, you're still not losing money.
The same math is why I'm not going to spend $40,000 on every single campaign. I explain how we set the limit per campaign in how many ads to launch and when to turn them off.
Why Do Most RIAs Spend Too Little on Marketing?
Because they've never done the math.
The plague of the RIA industry is that it's under-invested in marketing, because firms have never done this math. That's also the first of the six reasons your Meta ads didn't work: you didn't spend enough.
Don't take my word for it. Take all the assumptions I just gave you, put them into ChatGPT, and see what it tells you. If you find something different, let me know. Even better, if you're selling your practice to a private equity firm, show them this and see what they say. This is how most firms do the math of client acquisition.
It's also why building your own client acquisition is different from buying leads. When you run your own ads, you're starting your own marketing system instead of renting it from somebody else. The comparison is laid out in Meta ads vs lead vendors for financial advisors.
Should You Stop at Your Best ROI?
No. Your return on each dollar goes down as you scale, but the actual cash in your pocket goes up.
As you scale up your marketing, each dollar you spend returns less. Say you spend your first $10,000 on ads, you get a client, and it gives you a 12x return. Spending $100,000 might get you more like 6x. Spending $10 million might get you 3x. That's the minimum return on lifetime gross profit we want to aim for.
But look at the actual cash in your pocket. It generally goes up. With $10,000 spent at a 12x return, you get $120,000 back. That's $110,000 in profit. A pretty nice payday.
With $100,000 spent at a 6x return, you get $600,000 back. That's $500,000 in profit. Not bad. With $10 million spent at a 3x return, you get $30 million back, and $20 million in profit. It looks worse relatively, but in absolute numbers, a $20 million bank account is much bigger than $110,000.
So don't stop at the best ROI. Spend to your maximum allowable cost to acquire clients.
In practice, that means when something is working, you spend more on it until it breaks. At the workshop, a solo advisor told me they were running local static image ads on a small budget and had gotten three appointments and one client. I told them to spend more. Raise the daily budget about 20% every week or so, and see where it breaks: the point where you're just spending money to spend money and not getting more people. Stop there. Then launch more ads in the same format that worked, with different angles, and see if you can find another winner.
For how the whole system fits together on Meta, start with the complete guide to Meta ads for RIAs.
