Updated Sunday, August 2, 2015 as of 6:29 PM ET

Who Are the Best Buyers for RIA Firms?

Should RIA founders sell to an outside buyer or to junior partners already in the firm?

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Comments (2)
The reason there are 30 buyers for every seller is that sellers have come to realize their valuations are inconsistent with a buyer's ability to achieve the proper return on their risk capital, and that the seller winds up sharing too great a proportion of the risk.
There is an alternative. Sellers may keep their independence and optimize their values at the same time.
Here is how:
Use True Market Models (available on Placemark, through TDA or Fid) as your core strategic portfolio manager.
Then use their suite of back office services for a greatly discounted amount.
You retain your CRD #, and complete autonomy and independence.
That gives a built in better business model, and automatic succession plan at your convenience and on your terms.
Posted by Mitch L | Tuesday, May 06 2014 at 3:06PM ET
As a newly former RIA, we decided to opt for the same business model that CPAs and Law Firms have literally used for more than a thousand years; and that is a Partnership model set up as a PC or a LLC. Partnership within the firm is determined by equity (ownership) that comes in the door either by way of a direct outlay of cash, or by fee-based revenue generated by client accounts. There are Senior Partners, Junior Partners, Associates and Admin Staff (hired help). When the time comes for anyone with "partner" as part of his/her job title to leave the firm, it will mean the firm buying out their portions of equity at pre-determined prices based on previous CPA audits and valuations. No surprises, no hidden agendas and no unanswered questions as to who really has "ownership" over a partner's accounts.

This is completely different that what too many B/D firms with "blurred" job descriptions as to whether a person is an employee or an independent contractor. Just try leaving a B/D and suddenly you will see who really tries and claim "ownership" over client accounts; and it is NOT the Reps who were told that they were Independent Contractors. Suddenly all of their accounts are treated as if they were "company property" that could be readily reassigned and no compensation is made to that outgoing Rep.
Posted by Ralph M | Wednesday, May 07 2014 at 2:48PM ET
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