What’s an RIA’s Ideal Model? (Hint: It’s About the Money)

aRIA’s fourth free white paper for independent advisors talks about the difficulties of getting into M&A and advisor recruiting

For registered investment advisors, getting into mergers and acquisitions as well as advisor recruiting may be even tougher than starting up a business, but it may be the only way for them to survive, says the Alliance for RIAs (aRIA) in its latest whitepaper.

Looking to help indie advisors stay independent, aRIA on Wednesday released its fourth in a free four-part white paper series, “Realizing Your Ideal Model,” which gives advisors tactical information about what their options are for a sustainable model. While many advisors express a desire to grow aggressively, they are often not willing to make the sacrifices and material investment to execute effectively, aRIA asserts.

Independents may be the fastest growing segment of the financial advisory industry, according to aRIA, but the wirehouses are awakening, and the consolidators are driving scale similar to their wirehouse counterparts.  Recent thought leadership outlines a bleak future for independent RIAs, so those who want to remain indie have to figure out who they want to model themselves after – and at the end of the day, the ideal model is all about the money.

Look for Best Options if Negotiations Fail

Specifically, those options hinge on something that aRIA calls the Best Alternative to Negotiated Agreement, or BATNA, which is the best option for an advisor if a deal falls through – and advisors shouldn’t accept anything less than their BATNA in any negotiation, whether buying or selling, the alliance says.

“This concept is used by sophisticated negotiators when helping a client think through the best alternative to a transaction if negotiations fail and an agreement cannot be reached,” says the whitepaper in explaining the concept of BATNA. “Any party that is considering any transaction should understand what their BATNA is and should generally not accept anything worse than BATNA. Advisors considering a transaction or a move to another model should understand what their best alternative is if best laid plans fall through.”

An advisor’s BATNA could include not going it alone and seeking alternative model options, according to aRIA, which is an alliance of six succesful RIAs, including Brent Brodeski, CEO of Savant Capital; John Burns, principal at Exencial Wealth Management; Ron Carson, CEO of Carson Wealth Management Group; Jeff Concepcion, CEO of Stratos Wealth Planning; Matt Cooper, president of Beacon Pointe Wealth Advisors; and Neal Simon, CEO of Highline Wealth Management. 

This spring, aRIA was selected as a winner in Investment Advisor magazine’s 2013 IA 25 of movers and shakers in the industry.

For Independents, ‘The Time for Talk Is Over’

The white paper series, “Creating Value and Certainty Within Your Independent Advisory Firm,” is based on the combined experience and observations of these six RIAs, who collectively manage more than $20 billion of client assets and have demonstrated a track record of strong asset and revenue growth.

Key issues that aRIA identifies as critical to growth and recruiting/M&A include:

• It really is about the money—every deal must be accretive for all sides

• It's a numbers game—advisors will “kiss a lot of frogs” to find the right match

• Accepting any/all comers is not an option—advisors must be selective

• You will have to go selling—no one will hand you books of business

• Your growth story and messaging must be ready for show and tell

“The time for talk is over—if independents want to remain the fastest growing segment of the industry over the next 10 years, then we need to get real about business management and what it takes to execute a growth strategy” said John Furey, principal at Advisor Growth Strategies LLC and managing member of aRIA, in a statement. “At aRIA, we are not afraid to share our success stories and we show advisors how to build a firm to last for generations.” 

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