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June 10, 2019 at 04:04 PM
Dynasty President and CEO Shirl Penney.
Dynasty Financial Partners says it is rolling out a new financing program for advisors going independent.
The RIA services group says its Freedom Note will give qualified advisors who join its network an eight-year “forgivable loan” based on a percentage of their yearly fees and commissions. This amount will have to be repaid with a portion of the RIA’s revenue; once it is, the advisors will own all of the RIA’s equity and can continue to work via a partnership with Dynasty.
For instance, advisors can elect to receive 100% of their trailing-12-month revenues. During the loan period, they will receive 65% of this production, and 35% of it will go to Dynasty for loan interest, principal servicing and access to the network’s middle- and back-office services.
“It’s similar to forgivable note structure [now offered by some wirehouses] in that it’s paid one-eighth … per year, and if the advisor sold their RIA — let’s say at the end of year five — they would owe only three-eighths of the note at that period,” said Dynasty President and CEO Shirl Penney.
In other words, Penney explained, “It’s a loan to the RIA and the principal, so they take the money out (if they want to) and pay it back via cash flow from the business.” This makes it more tax-efficient in its treatment of upfront proceeds, he adds.
