“I don’t want to join a firm that’s owned by private-equity?”

Why is that?

“They just want to build it and sell.”

But isn’t your current firm (whatever that may be) for sale and susceptible to change?

“No, not with the kind of firm I’m at.”

Are you sure about that???

Advisors often overweight the risks involved with joining a firm that has private-equity backing, while underweighting in comparison the risks with other firm structures.

On this episode of the Transition To RIA question & answer series, I explain how advisors are better off focusing on how to protect themselves from possible ownership changes, versus worrying as much about who the owners are.

I'm Brad Wales with Transition To RIA (TransitionToRIA.com). This is episode #103 of my question and answer series where I answer RIA related questions I get from advisors just like you.

What I do: At Transition To RIA I help financial advisors understand everything there is to know about WHY and HOW to transition their practice to the Registered Investment Advisor (RIA) model.

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🔹 Whitepaper ("11 Ways The Economics Of The RIA Model Are Superior To Other Advisor Affiliation Options"): https://transitiontoria.com/whitepapers/

🔹 Transcription of video:

Should I avoid joining a private equity backed RIA? That is today's question on the Transition To RIA question and answer series. It is question #103.

Hi, I'm Brad Wales with Transition To RIA where I help you understand everything there is to know about why and how to transition your practice to the RIA model.

If you're not already there, head to TransitionToRIA.com where you’ll find all the resources I make available from this entire series in video format, podcast format. I have articles, I have whitepapers. All kinds of things to help you better understand the RIA model.

Again, TransitionToRIA.com.

On today's episode, we're going to talk about something I get asked from time to time. If you listen to many of these episodes, you know I talk about there being multiple pathways to transition your practice into the model.

For some of you that might be starting your own RIA, for some of you that might be joining an RIA, and then there are some flavors in the middle.

If you're considering the path of joining an RIA, I have heard advisors say, "I don't want to join any RIA that is private equity backed, P.E. backed."

I wanted to do an episode on this to give you a couple thoughts of how I usually respond, and why I don't think you should fear it as some folks do.
The fear I often hear is, "These private equity firms, all they want to do is sell. They want to buy it. They want to grow it. They want to pump it. Their goal is just to sell the thing and move on. All they want to do is sell, sell, sell. I don't want to be along for the ride for that."

With that theme in mind, you must step back and ask yourself, "Well, perhaps every firm is for sale?" I want to give some examples of what I mean by this, and why you'll start to see that just because a firm might be private equity backed, who might have a goal to one day have some sort of liquidity event, that doesn't differ a whole lot from almost every situation that's out there.

These examples could be applicable to the firm you’re currently at now, or firms you might consider transitioning your practice to.

The first example would be if you work for a large brokerage firm now. Perhaps you're at a wirehouse or a regional firm, and it might not be occurring to you, your firm is for sale as well.

I experienced this firsthand. This goes back to the '08, '09 turmoil in the markets. I worked for a large publicly traded brokerage firm. With all the turmoil, there was concern amongst the employees of, “Is someone going to come in and buy the firm and lay off employees?" There was worry about this.

At a firm-wide meeting where questions can be asked, I remember the CEO at the time said, "Keep in mind, we're a publicly traded company. Whether it's '08, '09, or it's more normal years, every Monday through Friday between 9:30am and 4:00pm, we are for sale. Anyone with capital can come in and start buying the business. For the most part, we don't have control over that."

So, if you're at one of those firms now, you are already for sale. Con't....

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