Taking Control of Your Destiny

Jim Wilkerson Managing DirectorIntegrated management Resources

Business Planning

Identify/create your value proposition Assess the strength of your relationships with

your clients Assess your team, will the team support? Discuss with family Determine how much you can physically,

financially and mentally afford***

The Advisor Who is Considering Independence

Has the firm’s culture changed?What is the firm’s agenda? How does that

fit with my own agenda? Do you feel that management hinders the

ability to get things done?Management changes? Compensation plans?

Do You Fit the Independent Model?

Entrepreneurial Client CentricEstablished and strong client

relationships Business is profitable and revenues can

support independenceOrganized

Identify Which Independent Model Suits You Best

Do you have the capacity to manage your firms operations?

Are you looking for total autonomy or want the brand and infrastructure of an established B/D?

Looking for upfront capital?Prefer equity ownership? Identify top priorities

The Two Paths to Independence

RIAIndependence with an established

Broker Dealer

The 5 RIA Models

1) Pure Independent RIA2) Independence with platform provider3) Affiliation with a financial partner4) Setting up a business as part of an

established firm or group5) Joining an existing RIA firm

1) Pure RIA Model – True Independence

Truly your own business – equity ownershipOpen architecture – products and providersCustomized solutions for HNW/UHNW clientsNo restrictions from B/D on OBA

No home office restrictions with regards to marketing activities/social media strategyManage your own compliance

2) RIA Model with a platform provider

Still owning your own business – equity ownership

Open architecture – products and providersCustomized solutions for HNW/UHNW clients

Compliance and Operations Options that are flexible

3) RIA Model affiliated with a financial partner

In return for giving some ownership to the firm, receives financial support

Open architecture – products and providersCustomized solutions for HNW/UHNW

clientsCompliance and Operations Options that

are flexible

4) Setting up a business at an established RIA

Independent but an employee of the firm/group

Financial support upfrontInfrastructure supportMany times involves an equity stake in

the parent company

5) Joining an Existing RIA Firm

Can be an employee or partner Financial support, cash up front Infrastructure support Equity stake in the RIA

What to consider before becoming an RIA

Start up costs Real estate Personnel Technology

Complexity of the business Custodian relationship Clearing platform Legal & Compliance Investment offerings – selling agreements Technology

Affiliated Independent Model

Sophisticated operational and back office infrastructure

Greater control over pricing for clients Start up capital An entrepreneurial environment with the

support to focus on what is important***

Affiliated Independent Cont.

Turnkey Platform and technology – plug and playUpfront investment in your businessCo-branding with the B/D if preferHome office support

Operational Marketing, advertising & branding Compliance & legal

Practice Management resourcesMany today offer the hybrid RIA structure option

The Hybrid RIA

Don’t have to choose one model over the other – brokerage/transaction fees and fee based**

Dually registered: joins a fee based RIA and is affiliated with an independent B/D

Semi-captive: affiliates with a B/D that offers an RIA. IBD chooses custodian

Key benefit – turnkey infrastructure and support

Due Diligence Process

Understand B/D Platform limitations Home office involvement with compliance

and marketingFINRA regulated and increased scrutiny,

increased B/Ds oversight

The Economics by Structure

National Firms

Offer largest transition packages 330%+

Cash payout ranging from 38-44%

Avg GDC $800k

Regional Firms

Fewer levels of management

Transition packages range between 80-125%

Cash payout ranging from 38-50%

Avg GDC $400k

The Economics by Structure

Boutique Firms

Require higher minimum account sizes

Transition packages range from 200-225%

Cash payout ranging from 38-44%

Avg GDC $800k

Quasi Independent Firms

Offer transition deals ranging from 100% +

Cash payout at the low end 50%

Equity Ownership

The Economics by Structure

Independent Broker/Dealers

Business owner modelGross payout ranging from 80-90%

Net 55-70% after expenses

Avg GDC $400k

RIA

Pure IndependenceGross payout 100%Net 65-75% after expenses

Equity Ownership

The Economics At a Glance

Wirehouse IBD RIA

Revenue $1,000,000.00 $1,000,000.00 $1,000,000.00

Fees/expenses House ($600,000.00) --- ---

Broker/Dealer Fee --- ($150,000.00) ---Expenses --- ($300,000.00) ($300,000.00)_______________________________________________________________

Payout or profit $400,000.00 $550,000.00 $700,000.00

The RIA Module

Mergers and Acquisitions

M&A Risk Factors

Employee Related

Seller Related

Client Related

Deal Related

M&A Risk Factors

Employee Related

Turnover – potential loss of key people Retention of legacy employees Cultural differences – challenge of adaptingExpectations – equity ownership

M&A Risk Factors

Seller Related Risks

Lack of established new roles, responsibilitiesPoor planningClients and employee retention

M&A Risk Factors

Client Related Risks

Clients decide not to move to the firmClients leave after the closeToo many client with few assetsAcquire high maintenance clients

M&A Risk Factors

Deal Related Risks

Strategic rationale must be compellingInadequate due diligenceIntegration of the firms drags outBuyer acquired at too high a priceGeographic market Poor enterprise value analysis

How do I determine my firm’s value?

Revenue Multiple Trailing 12 months X (N). N= Avg industry multiple is 2.1

Profit Multiple Bottom line X (Y). Y= Avg industry multiple is between 4 and 8

Present Value (x + y) x (discount rate) = z of Income* x = 10 years projected revenue

y = firms 10 profit margin projectionz = Present value of income

* It is advised to work with a CPA to ensure proper analysis

RIA Valuation Model

Succession planning Assess current position and prepare the firm for valuation and transition

Practice sales Quantify market performance and market potential that supports valuation

Practice acquisitions Broader search and due diligence produce improved fit and post-transaction performance

Pricing An objective assessment of a practice's unique retail market characteristics and growth rate

Business planning Objective market position assessment and quantification of sales and marketing programs

Empirics Applications in Wealth Management Firm Planning & Valuation

National Firms

Bank of America/Merrill Lynch Morgan Stanley UBS Wells Fargo Oppenheimer

Regional Firms

RBC Raymond James Stifel Nicolaus Janney Montgomery Scott RW Baird Hilliard Lyons Waddell & Reed Ameriprise Edward Jones

Boutique Firms

Credit SuisseDeutsche Bank JP Morgan SecuritiesBarclays WealthGoldman SachsPrivate Equity Firms

Quasi Independent Firms

Hightower Advisors Cantor Fitzgerald Wealth Partners Focus Financial Dynasty Partners United Capital

Independent Channel Firms

LPLAmeriprise FranchisesRaymond James Financial ServicesCommonwealthSummit Cetera – RCS CapitalNational Planning

Holdings:- Invest Financial Corp

-Investment Centers of America

- SII Investments

ING Financial PartnersAdvisor Group - FSC - Sagepoint - Royal Alliance - Woodbury Financial Wells Fargo Financial

Network (FINET)Cambridge InvestmentMany others!

We will save you Time Money and Stress! For years we have been helping financial advisors and wealth managers like you

with their due diligence when they are ready to transition their practice to another firm or business model.

We know you are busy helping your clients If you choose to hire us as your consultant, our value is, that we will save you time,

money and stress by helping you evaluate all of the industry products, platforms, culture, and personalities for your consideration.

If you are ready to begin the process, and haven’t found the right opportunity or you have simply been too busy to do your own due diligence, please call 480-460-4422 to

set up an initial meeting with us. You could also email me at jim@integratedmgmt.com . We look forward to speaking with you soon.