Below are the most commonly asked questions we receive from the “breakaway brokers” and advisors who are considering joining our network. The aspiration of every managing partner who owns a business, is to obtain the answers to the following questions.
1) What is my firm actually worth?
To establish your actual equity value, you need an “independent”, third party valuation usually. A CPA firm, or investment bank will provide that service and it never is just a variable of AUM’s.
2) How do I get a independent third party evaluation, that is more than a multiple of AUM’s.
There are firms that specialize in the financial service field and understand our practices intimately. We have established relationships with a few of such entities
3) How do I monetize the equity in my firm without giving up control?
Institutions like banks, invest in the fees of investment advisory firms. The reason they are attracted to this type of vehicle is because they do not have to reserve for these assets on their balance sheet. Pensions and insurance companies are also attached to “fee-based” RIA’s.
4) How do I build a succession plan with legal contracts, that I can utilize for a shareholders agreement?
You need to structure your firm as a legal entity. All agreements in writing, succession plan in place, shareholder documents, etc. If you are doing “fold ups”, client ownership and buyout scenarios are required.
5) How do I access capital to acquire smaller firms, and do “tuck ins” under any RIA?
We have found three usable options, investments banks, RIA Network financial intermediaries, and clearing firm arrangements.
6) Where do we go to establish a T.A.M.P. (Third Part Asset Management Platform) and how do I establish a track record of performance?
If you can “vet” out your portfolio platforms by establishing even a hypothetical track record that is back tested and formulized is a good start. You need to be approved by the clearing firm and its of utmost importance to have your performance numbers GIPS compliant for credibility.
7) Is it possible to manage money internally within my broker-dealer and externally for outside Broker-Dealers?
Yes, with American Portfolios, which truly accepts and promotes the “hybrid RIA” as a stand alone entity.
8) Isn’t there more value to a firm than just payout & cash flow?
Your “stock” NAV is what is often overlooked in our “RIA Network”.
9) What is a written succession plan?
The continuity and agreements of a closely head business that reflects all “what if” scenarios. Once established with multiple owners, your share ownership could be transferred into a “FLP”, and enjoy a minority issued discount.
10) Why would I rather not sell my firm to a stranger and work within a board of like minded individuals?
Personally, I would not want to be part of a succession plan. The end result is for selling to a stranger, no matter what the monetary value to me. It would be of utmost importance, to work with like minded – RIA firms prior and get comfortable with their ethics and values. In a network it would be possible to be on the same “B/D”, and be part of a board that drives the thought process of our common broker-dealer.
11) How do I create an income stream from “dormant assets” ie. VA, VUL, 401K’s, 3rd party qualified plans?
Through the utilization of “Data aggregation” services and embracing our fiduciary responsibility, we have risk management firms developing transparent fee-based products that are “client centric”. Once you separate yourself from Insurance Product manufactures. There is a brand new world of vehicles being developed in this area.