Recruiting momentum continues for Ameriprise with 79 experienced advisors joining Q1 2018. Advisorbox has updated our analysis on the independent franchise model offered by Ameriprise Financial.
Of the independent options, we help advisors evaluate and join, the independent franchise model is less familiar to advisors than the RIA or IBD standard models.
What we love most about the independent platform is that there are a lot of “right” choices and a model available for about all advisor preferences.
There are always tradeoffs with any model, all having their set of benefits and drawbacks. A pure independence model with the highest gross payouts and level of freedom an advisor may want can lack the support and infrastructure the advisor needs. A more structured and supported independence model may not provide an advisor with all of the operational freedom they desire.
From a recruiting perspective, the biggest benefit of independence is that advisors can generally move to a different model unencumbered by protocol or non-solicitation agreements. This enables indie advisors to make adjustments in their independent model strategies as their preferences, experience, and goals evolve. It enables breakaway advisors with the security that once they become independent, changing to a different model than the initial model they joined, is not the same as switching firms in the wirehouse and regional W-2 models.
The Ameriprise Franchise Group (AFG) offers the franchise model which can appeal to current independent advisors and breakaway advisors for many of the same reasons.
Independent advisors interested in exploring the franchise model are typically looking for more support, infrastructure, scale, and access to acquisitions than they have with their current model. Breakaway advisors typically interested in the franchise model are those who do not want to be all on their own, at least initially, wants the systems and scale of a franchise model, and feels more comfortable with a big name and balance sheet behind them.
In addition to the structured independence support, three of the value props that seem to resonate most with both independent and break away advisors are:
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 the other offers an 80% bonus, that’s a difference of $1,000,000.
This recruiting bonus differential dilemma is manifested when advisors 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?”
Franchises Net as Much as RIAs and More than Other IBDs
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. RIAs typically average 55% to 65% net payout after expenses, same as Franchises. Generally speaking, the 9% Franchises give up in grid payout for the independent platform’s leading support value prop, costs a Franchise nothing in profit dollars.
If growing through acquisitions is a top priority for you, your first consideration is whether your current IBD or custodian places you in an advantageous, competitive position that maximizes the likelihood that you’ll achieve your acquisition goals. The independent firm you join will either accelerate or hinder your inorganic growth; there is little middle ground.
Growing a Practice Through Acquisitions
Most completed acquisitions in the industry are not in the RIA model but in the IBD model. There are as many or more acquisitions completed within Ameriprise each year as there are in the entire RIA M&A industry combined.
Ameriprise helps franchise owners source both internal and external practices to buy, navigate due diligence, provide a book of business review for external acquisitions to evaluate product portability, provide their Practice Acquisition Guidebook, provide agreement templates for the lawyer, share the typical valuation multiples and deal structures, help with integration support, and will finance up to 50% of the acquisition.
If you would like to explore the franchise model value proposition more closely check out our detailed analysis or call us anytime.
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