Myth #3—Tucking-In Leaves Money On The Table
Certainly, there are arguments for and against running one's own RIA, but perhaps the most enticing reason to go it alone is to increase the value of an eventual change of control sale for an RIA owner. Conventional wisdom suggests that by tucking-in, advisors diminish the value of their life's work. But what drives the appraised value of a practice? It seems clear, that the value is found in the advisor-client relationship, not the RIA's registration.
For those who find it difficult to focus on their core responsibility of serving clients due to the do-it-yourself regulatory, operational and tactical requirements of running their own RIA, must decide if potential upside value of a future sale is worth the stymied growth, diminished returns and continued headaches of going it alone today. Additionally, finding the right partner for a future deal and financing it, likely will diminish the realized value of the final transaction.
Tucking into a larger firm may provide the flexibility needed to expand an advisor's core business, enhance the work-life-balance and simplify the succession planning in a manner that well exceeds the potential financial value of an eventual sale of a wholly owned RIA.
Be Informed By Facts, Not Myths
While a tuck-in isn't for everyone, going it alone may not always be the best answer. The trade-offs of joining a larger firm are real, but they may not be as clear cut as industry experts would lead advisors to believe. Advisors must take an honest assessment of how to best build their business and secure their own long-term financial stability. This process must be informed by the facts, not by myths.
Mark Contey is chief business development officer of Salle St., a family of wealth management firms encompassing an independent broker-dealer and registered investment adviser (RIA) platform. LaSalle St. supports more than 300 financial advisors, has over $12 billion in total client assets and is registered in all 50 states.