- On December 6, 2017
The only national franchise model in the independent channel is the Ameriprise Franchise Group (AFG). While AFG, represent one of the largest independent advisor forces with about 7,700 advisors, it is often the most misunderstood by wirehouse breakaway advisors.
While AFG, of course won’t be a fit for all independent minded breakaways, it is an option particularly attractive to wirehouse advisors making the transition to independent business owners. Ameriprise has more than 1,000 million-dollar producers and is aggressive in targeting wirehouse breakaway advisors to join them.
Advisorbox, helps breakaways consider and join all independent models. We do see AFG, positioned to have advantages over other models to a breakaway advisor in this new Non-Protocol wirehouse environment.
1. When Joining AFG, Advisors Receive Full Legal Representation for both Protocol and Non-Protocol Firm Advisors.
They pay for your legal consultation before your move, because they want you to follow the rules, follow either Protocol or Non-Protocol requirements, and do it right. Once you become a franchise owner, they will provide the legal representation for any potential litigation or TRO actions from your previous firm. This includes any potential settlements.
There are only a few major independent models where a breakaway advisor doesn’t have to come out of pocket for all legal expenses that can mount up from Protocol and Non-Protocol defense.
2. The “Ameriprise Recruiting Bonus Differential Dilemma”
AFG’s, recruiting bonus is so big, it causes what we at Advisorbox call the Recruiting Bonus Differential Dilemma for advisors who are considering options.
When a $1.3MM GDC advisor compares two independent options with similar gross payouts, but one offers no bonus (and no legal representation), and the other offers an 80% transition bonus, that’s a difference of $1,000,000. A million revenue plus advisor will get 50% of the bonus up front and the other 30% in the first few years.
This AFG, recruiting strategy places most of their competitors in a $1MM compensation hole from the outset.
AFG, causes advisors comparing AFG with a different independent option to ask themselves, “Is the other option’s value prop strong enough to overcome the fact I would give up $1MM of income to go there?”
3. Franchises Net as much as RIAs and more than other IBDs
Breakaway advisors are attracted to the 100% payouts of the RIA model. However, in the independent channel it is not mostly about payout, as much as it is all about profit. As independent business owners, it is your EBITDA, that reigns supreme in determining financial success.
AFG advisors, experience about the same or better profit margins than RIAs who have comparable size offices and staff. In both the AFG and RIA models, advisors typically see similar profit margins.
An advisor who chooses the pure independence RIA model with a 100% payout, typically makes the same or less profit, than the Franchise getting a 91% payout. Generally speaking, the 9% Franchises give up in grid payout to be plugged into AFG’s platform, more field management support than any other indie, and the turnkey systems, typically costs a Franchise nothing in profit dollars.
A key consideration of the Ameriprise compensation value proposition is: you will net as much or more with Ameriprise’s structured independence model, then if you try to figure it all out yourself in an RIA model, or than if you joined an IBD that can’t afford the recruiting bonuses, support, scale, and resources that AFG provides.
4. AFG has the Biggest Acquisition Growth Opportunity for Advisors in the Industry
Yes, this is bold claim, here are the reasons why Advisorbox makes it:
Ameriprise, will help source both internal and external practices to buy, help you through the due diligence, provide a book of business review for external acquisitions to evaluate product portability, provide their Practice Acquisition Guidebook, provide agreement templates for your lawyer, share the typical valuation multiples and deal structures, help with integration support, and will finance up to 50% of the acquisition.
Access to a large pool of current and pending sellers puts the wind at your back when it comes to inorganic growth. The average age of a seller is about 59 years old. Therefore, acquirers should evaluate the IBD or custodian’s pool of advisors who are 59 years old and over, plus the number of future acquisition targets who will be turning 59 (or so) over the next ten years. AFG has 1,000 advisors who are currently 59 or older and another 1,000 from 49 to 58 years old. This is a bigger seller pool than Commonwealth, Wells Fargo FiNet, Royal Alliance, and a hundred plus other IBDs have in total advisors.
There is more annual M&A activity at Ameriprise than all RIA M&A combined. Ameriprise facilitates about 400-500 partial and full acquisitions each year amongst their advisors. The reported RIA M&A activity is less than half this volume.
5. Prefer Structure, Support, Turn-Keyed Systems and a Strong Brand
In the beginning stages of considering independence, the primary initial question breakaway advisors should ask themselves is, “What level of independence and support do I want?”
A Franchise gives you independence plus the needed support and turnkey systems, that you choose and tailor to your practice, at economies of scale. Just because there is structure, doesn’t mean there isn’t flexibility. As a Franchisee, you can utilize all the structured support available or just the base level.
The value proposition of the Ameriprise Co-Branded Franchise Model, is that you are fully independent with complete ownership of your equity and clients. You make your own decisions regarding your team, practice and get to leverage the strength of their national brand and support structure as well as turnkey systems inherent in their franchise model.
For Breakaways, the Structured Independence Model, is an ideal option to ease into independence. If later, you feel AFG, isn’t the best model for you, then you can simply move to a different IBD, or to the RIA model. You own your own business and clients and have the freedom to affiliate with any firm or model you want.
Interested in more information about breaking away to AFG independence?
Call us, we will be happy to help you evaluate AFG, and all other independent models.
For more about the AFG value proposition see the Advisorbox Ameriprise Analysis.
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