We believe RIA owners often overestimate their relative scale; underestimate the impact of the direct cost of employees and the time required to hire and manage non-advisory employees; and overemphasize the relative cost of technology and outsourcing solutions.As a result, RIA firms mistakenly in-source activities that would be more effectively outsourced.(More: 5 characteristics of growth-restrained RIAs)Higher EBAC Yields Higher Valuations The difference between the EBAC of the shared services cohort and that of the AGS custom cohort was 11%.
In an increasingly competitive and consolidating industry, RIAs should ask themselves: "Even though we have a successful firm today, is there a path to being even more successful, more sustainable, more valuable?
How can we benefit from achieving virtual scale through outsourcing versus doing it all ourselves? For some RIAs, it's not as good as it sounds)Todd Thomson is chairman of Dynasty Financial Partners.
Getting to scale — the virtual solution The industry may be adding registered investment advisers annually, but it's also consolidating at a record pace for one reason: the power of scale.
Highly competitive,, aggressive growth RIAs are reshaping the landscape.
Artificial intelligence (AI) may sound like science fiction, but it’s already integrated in many smartphone apps and other aspects of daily life.
Perform a Google search or online chat with customer service, and chances are you’re using it.
The Results Are In The research showed that virtual scale delivered through a shared services model can be an extremely effective, profitable means of driving RIA growth and value.
The shared services cohort reported EBAC of 62% of revenue on average.
The Study To draw apples-to-apples comparisons between RIAs that used shared platform services and those that did not, we created a new profitability measure called earnings before owner and adviser compensation, or EBAC.
Given the disparity in structures across the RIA industry, earnings before owner compensation, or EBOC, does not tend to work as a meaningful measure for larger, more professional RIA firms; and earnings before interest and taxes, or EBIT, does not tend to work for smaller, owner-operated firms.
The net result was lower profit margins and very likely a less scalable business model.