As I reread the interview I did with Fiduciary Network CEO Mark Hurley in the July issue, it suddenly dawned on me how prescient many of his observations were, particularly about the benefits and pitfalls associated with potential acquirers of RIA firms. At the same time, I couldn't help but wonder how much he had contributed to the delusional suspicions among many RIAs that their businesses were worth a fortune.

So I went back and looked at an article I wrote in April 2007, shortly after Fiduciary Network bought stakes in Regent Atlantic and Evensky & Katz. In that article, Hurley threw out valuation figures like 8 to 14 times EBITDA. Hmm. But I printed it.

Other investment banker types cited similar figures. When I contacted Hurley yesterday, he said he would still invest at those stratospheric multiples if it were the right kind of very large, high-growth firms. "But it's more complex than that," he added.

Three years ago, I remember bouncing those valuation metrics off of Mark Tibergien, then at Moss Adams, where he was the RIA business's undisputed valuation expert. This was early 2007-a different era-but Tibergien remarked that he thought 4-5 times EBITDA was a far more realistic figure for all but the largest, fastest-growing firms. Tibergien seemed to think an advisor who got a few million for his business and invested the proceeds in dividend-paying, blue-chip stocks, and then remained a paid consultant to the acquirer or worked for a five-year earn-out, was doing fine.

To be sure, Hurley is only buying 20% to 30% equity stakes in large firms and helping the next generation finance their way into ownership. So he is more of an investor than an owner who has bought stakes in 10 firms and is looking to do only another 15 or 20 deals.

One issue I have with valuing advisory firms is that the A (for amortization of goodwill) is a huge part of the number. If a firm has a 95% plus retention rate, obviously there is a lot of goodwill associated with it. But how do you place a value on it?

And there is a huge disconnect in the market for most advisory firms. Simply put, it's a market that is failing to clear. That's why sites like FP Transitions report there are 10 buyers looking to buy books of business at bargain-basement prices for every seller. Reminds me of a story I recently heard about a young loan officer who had agreed to sell a foreclosed house with a $140,000 mortgage in Sarasota, Fla., to a prospective buyer for $20,000. The loan officer's boss nixed that deal. And it's little wonder many advisors choose to keep working rather than sell their life's work for a song.

Finally, the fact that Hurley is still willing to pay a king's ransom for a sliver of equity in a miniscule fraction of the thousands of firms in this business doesn't mean one can extrapolate his metrics across an entire profession.