An alliance of six registered investment advisors who collectively manage more than $20 billion of client assets on Monday released a free white paper that outlines for other RIAs how they can evaluate their firm's potential true worth to buyers.
The third of a four-part series for advisors, the newest white paper explains why independent broker-dealers are less valuable than RIA firms, while telling indie advisors how they can command a premium for their businesses while avoiding the pitfalls that high-profile deals can suffer.
Titled "Myth vs. Reality: What is Your Independent Advisory Firm Really Worth?," the paper from aRIA, a think-tank study group, also outlines how advisors can grow the value of their business, dependent on variables such as cash flow, organic growth and risk.
The aRIA Group's six member RIAs include Brent Brodeski, CEO of Savant Capital; John Burns, principal at Exencial Wealth Management; Ron Carson, CEO of Carson Wealth Management Group; Jeff Concepcion, CEO of Stratos Wealth Planning; Matt Cooper, president of Beacon Pointe Wealth Advisors; and Neal Simon, CEO of Highline Wealth Management.
'Multiple Gap' of Missing Variables Examined
"This paper is for advisors looking to increase the sale value of their firm now, in the future, or who are simply curious about the behind-the-scenes assessment and analysis related to all of these deals we read about in the press," said John Furey, aRIA's managing member and principal at Advisor Growth Strategies LLC, in a statement. "This is our most detailed white paper yet, a guidebook for valuation that no advisor in any form, RIA, IBD or wirehouse, who is contemplating a transaction, should be without."
The paper lays out what the aRIA members call the "multiple gap," meaning the missing variables that cause many advisory firms to believe they are worth more than they really are. It examines whether size really matters, why there are so many valuation models, and how advisors can implement best practices around key value drivers.
