In a sign of the competition for financial advisor talent and the application of AI web developer tools, new compensation and business valuation calculators are popping up all over.
When asked how and why recruiting firm Bridgemark Strategies has launched five different "
"Every time I talk to an advisor, they don't understand either what their true payout is or what their business is really worth," Nash said, noting that his team was seeking to help advisors "see the pros and cons and "what's really out there" as they consider whether to change firms or launch their own someday. "Our best client is the most knowledgeable client," he added.
A bumper crop of calculators
The growing plethora of calculators, as well as firm-specific recruiting pitches tied directly to numbers, are giving advisors a greater baseline of understanding in a time marked by a high volume of moves across the industry.
An advisory practice valuation consulting firm rolled out its own calculator tool last week, joining a profitability analysis created by a hybrid registered investment advisory company to demonstrate the possible advantages of going to the firm and other numbers-driven industry recruiting pitches aiming directly toward the bottom line. In fact, another recruiting firm, Diamond Consultants, worked with wealth management publication
The burgeoning calculator tools reflect the race to woo top advisors, the rising capabilities of AI and how "the ability to compare apples to apples has become increasingly important" on the recruiting trail, according to Diamond President Jason Diamond. They're "not supposed to be a sales pitch for independence by any stretch," as much as "really just trying to put numbers to it to make it more real" for advisors who are wondering about the value of their practice, he said.
"It oftentimes blows them out of the water," Diamond said. "Some advisors have a good sense of what their business is worth, but plenty of advisors have never gone through a valuation."
Nice numbers to be food for thought
The Bridgemark tools provide example valuation and payout figures where users can fill in their own corresponding ones to see how they shake out. For example, a firm at a W-2 employee brokerage with annual 12-month production of $2 million might boost its value by $9 million in just five years by becoming 1099 independent contractors at a different company.
A sunset succession-plan deal for a W-2 advisor generating $4 million in annual production could amass a net payout stream of $5.3 million after taxes. A practice with $4 million in yearly revenue, including $3.4 million in advisory fees, could fetch a value upwards of $18.4 million. A W-2 advisor generating $2 million in annual revenue could earn $537,000 in "net equivalent compensation" after taxes and fees, plus deferred compensation of more than $117,000, while an independent advisor with the same production could earn $880,000.
"'Headline numbers' rarely tell the whole story. Between fees, structure, and taxes, the real difference between offers often isn't visible until you run the actual math," Bridgemark's website for the tools says. "These calculators use industry-typical assumptions to provide directional estimates. They are a starting point for better questions, not a substitute for a certified valuation or negotiated offer."
In developing the tools, Nash was seeking to enable advisors "to model out some scenarios" around various sources of revenue, the actual impact of typical costs and choosing whether to switch brokerage or RIA firms, he said. While "everybody talks about payout," they may not know how expenses such as administrative or platform fees on advisory accounts, compliance services or even staff bonuses can alter their ultimate take-home pay, Nash said.
Regardless, he pointed out that none of the tools should replace technical analysis by, say, professional valuation firms or other official compensation documents. But they could lend advisors a better understanding of their practice's valuation or their compensation.
"It's designed to help you learn, so you can ask better questions," Nash said. "And that's really what these are for, is to better learn, to ask better questions so you can get better answers."
