Jim Wilkerson Managing Director Integrated management Resources Business Planning Identifycreate your value proposition Assess the strength of your relationships with your clients Assess your team will the team support ID: 653286
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Slide1
Taking Control of Your Destiny
Jim Wilkerson Managing Director
Integrated management ResourcesSlide2
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***Slide3
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?Slide4
Do You Fit the Independent Model?
Entrepreneurial
Client Centric
Established and strong client relationships
Business is profitable and revenues can support independence
OrganizedSlide5
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 Slide6
The Two Paths to Independence
RIA
Independence with an established Broker DealerSlide7
The 5 RIA Models
Pure Independent RIA
Independence with platform provider
Affiliation with a financial partner
Setting up a business as part of an established firm or group
Joining an existing RIA firm Slide8
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 complianceSlide9
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 Slide10
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
Slide11
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 companySlide12
5) Joining an Existing RIA Firm
Can be an employee or partner
Financial support, cash up front
Infrastructure support
Equity stake in the RIASlide13
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 Slide14
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***Slide15
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 optionSlide16
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 supportSlide17
Due Diligence Process
Understand B/D Platform limitations
Home office involvement with compliance and marketing
FINRA regulated and increased scrutiny, increased B/Ds oversightSlide18
The Economics by Structure
National Firms
Offer largest transition packages 330%+
Cash payout ranging from 38-44%
Avg
GDC $800k
Regional Firms
Fewer levels of management
Transition packages range between 80-125%
Cash payout ranging from 38-50%
Avg
GDC $400kSlide19
The Economics by Structure
Boutique Firms
Require higher minimum account sizes
Transition packages
range from 200-225%
Cash payout ranging from 38-44%
Avg
GDC $800k
Quasi Independent Firms
Offer transition deals ranging from 100% +
Cash payout at the low end 50%
Equity OwnershipSlide20
The Economics by Structure
Independent Broker/Dealers
Business owner model
Gross payout ranging from 80-90%
Net 55-70% after expenses
Avg
GDC $400k
RIA
Pure Independence
Gross payout 100%
Net 65-75% after expenses
Equity OwnershipSlide21
The Economics At a Glance
Wirehouse
IBD RIA
Revenue $1,000,000.00 $1,000,000.00 $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 $700,000.00Slide22
The RIA Module
Mergers and AcquisitionsSlide23
M&A Risk Factors
Employee Related
Seller Related
Client Related
Deal Related Slide24
M&A Risk Factors
Employee Related
Turnover – potential loss of key people
Retention of legacy employees
Cultural differences – challenge of adapting
Expectations – equity ownershipSlide25
M&A Risk Factors
Seller Related Risks
Lack of established new roles, responsibilities
Poor planning
Clients and employee retentionSlide26
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 clientsSlide27
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 Slide28
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
(x + y) x (discount rate) = z
of Income*
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 analysisSlide29
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 programsSlide30
Empirics Applications in Wealth Management Firm Planning & ValuationSlide31
National Firms
Bank of America/Merrill Lynch
Morgan Stanley
UBS
Wells Fargo
OppenheimerSlide32
Regional Firms
RBC
Raymond James
Stifel
Nicolaus
Janney
Montgomery Scott
RW Baird
Hilliard Lyons
Waddell & Reed
Ameriprise
Edward JonesSlide33
Boutique Firms
Credit Suisse
Deutsche Bank
JP Morgan Securities
Barclays Wealth
Goldman Sachs
Private Equity FirmsSlide34
Quasi Independent Firms
Hightower Advisors
Cantor Fitzgerald Wealth Partners
Focus Financial
Dynasty Partners
United CapitalSlide35
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!Slide36
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 480-460-4422 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.