Taking Control of Your Destiny
Jim Wilkerson Managing Director
Integrated management Resources
Business Planning
 Identify/create your value proposition
 Assess the strength of your relationships with
your clients
 Assess your team, will the team support?
 Discuss with family
 Determine how much you can physically,
financially and mentally afford***
The Advisor Who is Considering Independence
 Has the firm’s culture changed?
 What is the firm’s agenda? How does that
fit with my own agenda?
 Do you feel that management hinders the
ability to get things done?
 Management changes?
 Compensation plans?
Do You Fit the Independent Model?
 Entrepreneurial
 Client Centric
 Established and strong client
relationships
 Business is profitable and revenues can
support independence
 Organized
Identify Which Independent Model Suits
You Best
 Do you have the capacity to manage your
firms operations?
 Are you looking for total autonomy or want
the brand and infrastructure of an
established B/D?
 Looking for upfront capital?
 Prefer equity ownership?
 Identify top priorities
The Two Paths to Independence
RIA
Independence with an established
Broker Dealer
The 5 RIA Models
1)
2)
3)
4)
Pure Independent RIA
Independence with platform provider
Affiliation with a financial partner
Setting up a business as part of an
established firm or group
5) Joining an existing RIA firm
1) Pure RIA Model – True Independence
Truly your own business – equity ownership
Open architecture – products and providers
Customized solutions for HNW/UHNW clients
No restrictions from B/D on OBA
No home office restrictions with regards to
marketing activities/social media strategy
Manage your own compliance
2) RIA Model with a platform provider
 Still owning your own business – equity
ownership
Open architecture – products and providers
Customized solutions for HNW/UHNW clients
 Compliance and Operations Options that are
flexible
3) RIA Model affiliated with a financial partner
In return for giving some ownership to the
firm, receives financial support
Open architecture – products and providers
Customized solutions for HNW/UHNW clients
Compliance and Operations Options that are
flexible
4) Setting up a business at an established RIA
Independent but an employee of the
firm/group
Financial support upfront
Infrastructure support
Many times involves an equity stake in
the parent company
5) Joining an Existing RIA Firm
 Can be an employee or partner
 Financial support, cash up front
 Infrastructure support
 Equity stake in the RIA
What to consider before becoming an RIA
Start up costs
Real estate
Personnel
Technology
Complexity of the business
Custodian relationship
Clearing platform
Legal & Compliance
Investment offerings – selling agreements
Technology
Affiliated Independent Model
 Sophisticated operational and back office
infrastructure
 Greater control over pricing for clients
 Start up capital
 An entrepreneurial environment with the
support to focus on what is important***
Affiliated Independent Cont.
Turnkey Platform and technology – plug and play
Upfront investment in your business
Co-branding with the B/D if prefer
Home office support
Operational
Marketing, advertising & branding
Compliance & legal
Practice Management resources
Many today offer the hybrid RIA structure option
The Hybrid RIA
Don’t have to choose one model over the
other – brokerage/transaction fees and fee
based**
Dually registered: joins a fee based RIA and is
affiliated with an independent B/D
Semi-captive: affiliates with a B/D that offers
an RIA. IBD chooses custodian
Key benefit – turnkey infrastructure and
support
Due Diligence Process
Understand B/D Platform limitations
Home office involvement with compliance
and marketing
FINRA regulated and increased scrutiny,
increased B/Ds oversight
The Economics by Structure
National Firms
Regional Firms
Offer largest transition
packages 330%+
Fewer levels of
management
 Cash payout ranging
from 38-44%
 Transition packages
range between 80-125%
Avg GDC $800k
Cash payout ranging
from 38-50%
Avg GDC $400k
The Economics by Structure
Boutique Firms
Quasi Independent Firms
Require higher minimum
account sizes
Offer transition deals
ranging from 100% +
Transition packages
range from 200-225%
Cash payout at the low
end 50%
 Cash payout ranging
from 38-44%
Equity Ownership
Avg GDC $800k
The Economics by Structure
Independent Broker/Dealers
RIA
Business owner model
Pure Independence
Gross payout ranging
from 80-90%
Gross payout 100%
Net 65-75% after
expenses
 Net 55-70% after
expenses
Avg GDC $400k
Equity Ownership
The Economics At a Glance
Wirehouse
Revenue
$1,000,000.00
IBD
$1,000,000.00
RIA
$1,000,000.00
Fees/expenses
House
($600,000.00)
----Broker/Dealer Fee
--($150,000.00)
--Expenses
--($300,000.00)
($300,000.00)
_______________________________________________________________
Payout or profit
$400,000.00
$550,000.00
$700,000.00
The RIA Module
Mergers and Acquisitions
M&A Risk Factors
Employee Related
Seller Related
Client Related
Deal Related
M&A Risk Factors
Employee Related
Turnover – potential loss of key people
Retention of legacy employees
Cultural differences – challenge of adapting
Expectations – equity ownership
M&A Risk Factors
Seller Related Risks
Lack of established new roles, responsibilities
Poor planning
Clients and employee retention
M&A Risk Factors
Client Related Risks
Clients decide not to move to the firm
Clients leave after the close
Too many client with few assets
Acquire high maintenance clients
M&A Risk Factors
Deal Related Risks
Strategic rationale must be compelling
Inadequate due diligence
Integration of the firms drags out
Buyer acquired at too high a price
Geographic market
Poor enterprise value analysis
How do I determine my firm’s value?
Revenue Multiple Trailing 12 months X (N). N= Avg industry multiple is 2.1
Profit Multiple
Bottom line X (Y). Y= Avg industry multiple is between 4 and 8
Present Value
of Income*
(x + y) x (discount rate) = z
x = 10 years projected revenue
y = firms 10 profit margin projection
z = Present value of income
* It is advised to work with a CPA to ensure proper analysis
RIA Valuation Model
Succession planning
Assess current position and prepare the firm for
valuation and transition
Practice sales
Quantify market performance and market potential
that supports valuation
Practice acquisitions
Broader search and due diligence produce improved
fit and post-transaction performance
Pricing
An objective assessment of a practice's unique retail
market characteristics and growth rate
Business planning
Objective market position assessment and
quantification of sales and marketing programs
Empirics Applications in Wealth Management Firm
Planning & Valuation
National Firms
 Bank of America/Merrill Lynch
 Morgan Stanley
 UBS
 Wells Fargo
 Oppenheimer
Regional Firms
 RBC
 Raymond James
 Stifel Nicolaus
 Janney Montgomery Scott
 RW Baird
 Hilliard Lyons
 Waddell & Reed
 Ameriprise
 Edward Jones
Boutique Firms
 Credit Suisse
 Deutsche Bank
 JP Morgan Securities
 Barclays Wealth
 Goldman Sachs
 Private Equity Firms
Quasi Independent Firms
 Hightower Advisors
 Cantor Fitzgerald Wealth Partners
 Focus Financial
 Dynasty Partners
 United Capital
Independent Channel Firms
 LPL
 Ameriprise Franchises
 Raymond James Financial
Services
 Commonwealth
 Summit
 Cetera – RCS Capital
 National Planning Holdings:
- Invest Financial Corp
-Investment Centers of
America
- SII Investments
 ING Financial Partners
 Advisor Group
- FSC
- Sagepoint
- Royal Alliance
- Woodbury Financial
 Wells Fargo Financial
Network (FINET)
Cambridge Investment
Many others!
We will save you Time Money and Stress!
For years we have been helping financial advisors and wealth managers like you
with their due diligence when they are ready to transition their practice to another
firm or business model.
We know you are busy helping your clients
If you choose to hire us as your consultant, our value is, that we will save you time,
money and stress by helping you evaluate all of the industry products, platforms,
culture, and personalities for your consideration.
If you are ready to begin the process, and haven’t found the right opportunity or
you have simply been too busy to do your own due diligence, please call 480-4604422 to set up an initial meeting with us. You could also email me at
jim@integratedmgmt.com . We look forward to speaking with you soon.