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Practice Management > Building Your Business

TD Ameritrade Online Tool Helps RIAs Analyze Firm Value

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For advisors seeking to buy or sell a business or attract new talent, TD Ameritrade has just launched an online tool to help the firm’s 4,000 institutional clients estimate their firm’s value and better understand the key drivers of that value.

Available for free to registered investment advisors (RIAs) who hold assets in custodial accounts with Jersey City-based TD Ameritrade Institutional, the tool was developed by Echelon Partners, a Los Angeles investment bank focused on wealth management.

Called the Valuation Analyzer, the tool allows advisors to input variables in 10 categories, including financial performance, growth and scale, clients, employees, management, business model, transferability, marketing, productivity, and economics.

“Historically, many advisors have relied on ‘rule of thumb’ methodologies to value their businesses. But each advisor’s practice is different, and the typical two-to-three times revenue multiple may not be reliable,” said Michael Watson, director of practice management, in a TD Ameritrade Institutional release.

The online tool generates three customized reports for advisors: a high-level pro forma financial overview of a firm’s key financial metrics, a summary approximating a firm’s current valuation, and a score card ranging from “excellent” to “weak” of the 10 valuation drivers.

“With the average age of an RIA over 50 and many nearing retirement, there is more demand from advisors to get a better sense of the value of their firm,” said Echelon Chief Executive Officer Dan Seivert, “The Valuation Analyzer arms advisors with information to help evaluate and maximize the value of their firm so they can position themselves to take advantage of potential inorganic growth opportunities such as mergers, acquisitions, or recruiting breakaway wirehouse brokers to their firms.”


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