I received the following e-mail in response to my November column in Investment Advisor, and my subsequent blog on the same topic, from Jim Dorman in Maitland, FL, about Mark Hurley’s latest report on valuation of advisory firms.
It was so exactly what I was talking about that I thought I’d share it:
“Your analysis of Mark Hurley's viewpoint of the valuation of practices caused me to laugh out loud. I have a 'small' practice, just short of $100 million AUM. My staff salaries will reach about 35% of my revenue, which averages 70 bps (normal fee is 1%). I'll make about 50%.I have 300 clients, 80 we actually do planning for; the rest are legacy accounts I will not fire.
“I have purchased four practices along the way with a 98% retention rate, given the client base that’s not always good.Bottom line, I play golf on Fridays with clients and guests. I don't see clients on Mondays and have 6 to 10 client appointments a week. I am in the office about 30 hrs. a week. I'm 52 and when in acquisition mode work many more hours. My staff and I know we can handle about five times our best client load and are on track to hit that number in five years without acquiring another practice.