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.
One RIA who understands these issues better than most is Peter Raimondi, CEO and founder of Banyan Partners and the subject of senior editor Eric Rasmussen’s cover story on page 68. After founding and selling his interest in The Colony Group, Raimondi started Banyan and has acquired five firms, including Silver Bridge, the wealth management arm of global legal giant WilmerHale. From what Eric writes, its sounds as though Banyan is well on its way to building a national RIA firm.

Several other articles in the issue address these topics from a variety of different angles. On page 55, Philip Palaveev confronts the thorny subject of how advisors have built firms more valuable than their junior partners can afford to buy. Meanwhile, the always provocative Mark Hurley delivers more good news for RIAs on page 124, namely that they will have to pay custodians a lot more for new client referrals than they currently are.

As you get back to work after Labor Day, these are some subjects for you to consider.

Evan Simonoff, Editor-in-Chief
E-mail me at [email protected] with your opinion.