🎙️ The Breakaway Briefing: Episode Summary
The Value Of Independence! Ask Roger
In this "Ask Roger" podcast, Roger Gershman delivers a strong case for why financial advisors should seriously consider moving to the independent model, arguing that the value proposition of banks and brokerage firms has been completely eroded.
Roger argues that wirehouses have become a "real thorn in advisor sides" because their priorities are misplaced:
Shareholder Value Over Client/Advisor: Firms are primarily interested in shareholder value, compliance, and legal liability, often prioritizing the "lowest common denominator" of the financial advisor or client.
Commodity Services: The services offered by banks and brokerage firms (comprehensive wealth management, trust, global investment solutions, lending, etc.) have become a commodity. These services are "all the same" as what is offered by independent custodians.
Roger directly compares the financial outcomes of staying at a wirehouse versus moving to an Independent RIA:
Metric
Wirehouse/Bank
Independent RIA
Net Income
<50% of revenue, fully taxable as ordinary income.
65% to 70% Net Operating Profitability, pre-tax 1099 income (allows tax management).
Transition Valuation (The Check)
~300% to 350% of T12 revenue (front-end/back-end with hurdles, locked up for 10-12 years).
N/A (No upfront "check" but immediate equity).
Business Valuation (Equity)
T12 revenue x 3.5 (Max)
Pre-tax income x 7 (approx. EBITDA multiple)
Example: The $1 Million Business
A $1 million revenue business that goes independent and achieves 70% net income ($700,000) is immediately valued at almost $5 million (7x pre-tax income).
Roger stresses that this $5 million valuation is arguably the advisor's lowest valuation and that there are many firms willing to take an equity stake in the independent RIA on day one.
The conclusion is that with identical client services and dramatically superior financial and ownership terms, the argument for staying at a bank or brokerage firm is highly questionable.
