An economist’s assets can be an accountant’s liability and vice versa. Take the odd nature of bank accounting, which has always intrigued me. Well, just a little bit. In banking, an institution’s loans are its assets while deposits are its liabilities.

In the advisory world, let’s for a second take an alternative approach to looking at assets and liabilities. In most knowledge-based professions, it’s often said that your assets are your people and they go up and down in the elevator every night.

Cynics argue that’s your overhead.

In the RIA business, who are your real assets, your staff or your client base? Good arguments can be made for both.

Few advisors would question the notion that a clientele of affluent professionals in their 30s is worth more than one of retirees in their 80s. Given the statistics claiming that most heirs of advisors’ clients are likely to seek a new advisor, some might even view the latter client base as a liability, not an asset.

What about personnel? Who is worth more to the firm, a 70-year-old founder with 70% of the equity working two days a week taking home the lion’s share of the business’s income or a junior partner working 60 hours a week earning 10% of the firm’s profits?

A potential buyer would see the founder as a liability and the junior partner as an undervalued asset. Most founders probably would disagree, noting that they are the ones that brought in almost all the clients.

Viewed through different lenses, both certain personnel and clients could be viewed as both assets and liabilities. There aren’t any easy answers.