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Wealth Professional | 15 Dec 2015, 08:15 AM Agree 0
Recently WP discussed the revenue multiple advisors can expect when selling their books with some taking exception to the high-end of the range but a succession planning expert explains how that’s possible
  • Ross Birney | 15 Dec 2015, 02:21 PM Agree 0
    I've heard similar stories from my friends when they describe the size of fish they caught.

    The math seems optimistic. Paying 5x annual gross revenue requires a minimum of 10 years to break even, after expenses and taxes, and that's only if you receive 100% of the revenue. Personally, I wouldn't even think of making an investment that required at least 10 years to break even.

    Evolution Wealth Advisors seems to imply this transaction can become profitable by either a) dramatically increasing the revenues on the same amount of assets or b) attracting a great deal more assets from the same client. Neither prospect seems realistic. If a client has a $5 million portfolio paying .85% in annual fees why would they suddenly wish to now pay 4.25% in fees (5 x .85)? If all they have is $5 million in investable assets how (or why) would they come up with the extra millions needed to make the "Evolution" purchase thesis feasible?

    It's difficult enough getting clients to stay when their advisor changes. If clients are expected to change platforms, change firms, pay more in fees and deal with an advisor in a different city then the "stickability" factor declines significantly.

    For every buyer there needs to be a seller. Under this scenario I expect there would be a multitude of sellers. In fact, if anyone is truly sincere about paying 5x annual gross revenue then I know of several books, all North of $100 million, that would be sold in a heartbeat. And I have a few good fish stories as well.

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