Assets Under Management
When calculating AUM, exclude non-revenue producing assets such as restricted stock positions that don't generate income for you or your firm.
Fee-based Assets
Fee-based assets, often called "advisory assets," represent the business for which an advisor typically charges a fee as a percent of assets under management (AUM). You may choose to include assets generating 12b-1 fees that may experience a future share class exchange to an advisory class.
Gross Revenue
Gross revenue includes revenues generated from advisory assets, brokerage assets, financial planning fees, referral fees, other commissions, and so on. In captive models, the term is synonymous with gross dealer concessions (GDC), which is the revenue to a brokerage firm when commissioned securities and insurance salespeople sell a product, whether it is an investment (such as stocks, bonds, or mutual funds) or insurance (such as life insurance or long-term-care insurance). The commission that the agent receives is usually a percentage of this figure.
Average Payout
Payout levels may be different for different products in the Full Affiliation model which is why the term Average Payout is used. Add: your pre-tax personal income generated by your mix of business. Subtract: out-of-pocket costs such as augmenting sales assistant compensation or business development related expenses.
Platform Pricing
Asset Based Pricing (ABP) model which has an annual minimum fee and includes custody, trading, and technology.
Non-Schwab Accounts at Primary Custodians
Custodians include: Fidelity (IWS), Pershing (PAS), Fidelity (NFS), Pershing. Also accounts held direct and cleared through DST FAN Mail.
Non-Schwab Accounts at Other Custodians
Includes all non-Schwab custodians not listed as Primary. It also includes data aggregated through ByAllAccounts.
Transition Costs
The Transition Cost estimate is a customizable field. Every transitioning advisor is responsible for a unique set of expenses based on his/her current and future environment. The tool begins with a fully loaded list of expenses to assist you determining a reasonable estimate for your individual situation. Transition costs include only one-time (sunk) costs associated with a change of this type. Healthcare, rent, supplies, and insurance costs are paid annually and are examples of ongoing costs that appear in the annual P&L. Those costs are not included in the definition of transition costs.
Transition Costs
The Transition Cost estimate is a customizable field. Every transitioning advisor is responsible for a unique set of expenses based on his/her current and future environment. The tool begins with an initial list of expenses to assist you determining a reasonable estimate for your individual situation. Transition costs include only one-time (sunk) costs associated with a change of this type. Healthcare, rent, supplies, and insurance costs are paid annually and are examples of ongoing costs that appear in the annual P&L. Those costs are not included in the definition of transition costs.
Transition Costs
No transition costs were added since this is your current environment. Include any additional annual costs by selecting the edit function in the overhead cost section.
Owners' Income + Profit
Owners' Income + Profit is total revenue net of overhead expenses, which include support and administrative staff plus non-staff expenses associated with running a practice. For example, if overhead expenses are 35 percent of total revenue, the Owners' Income + Profit equals 65 percent. Depending on an independent firm's P&L methodology, Owners' Income + Profit may include non-owner professional salaries and bonuses.
Full Affiliation
Employed by a bank/brokerage/wirehouse firm, regional brokerage firm or trust company.
Semi-Captive
Affiliated with a Broker-Dealer offering a corporate RIA and restrictions on RIA custodian access.
Registered Investment Advisor (RIA)
An independent registered investment advisor (RIA) is a professional advisory firm that offers advice about securities, largely for a fee. RIAs are registered with the Securities and Exchange Commission (SEC) or their state securities regulator and are subject to the Investment Advisers Act of 1940.
2.31 Valuation
A firm's value is ultimately determined based on many factors including the stability of its cash flow and market conditions. It may be reasonable to use a factor between 1.8 and 2.6 times revenue for firms with $100 million and more in assets under management (AUM), while firms with $500 million and more may warrant a multiple between 2.75 and 3.5 times revenue. In terms of EBITDA, a firm with less than $100 million in assets will often fetch a 4 to 5 times multiple of EBITDA. Firms with $100 million to $500 million may be in the 6 to 7 times multiple range. Firms with more than $500 million in assets may be worth a multiple of 8 to 10 times EBITDA.
Business Value
Business Value goes by many names including Enterprise Value, Terminal Value and Monetized Book Value. This is what your business may be worth. While it is common to use discounted cash flows to determine the value of a practice, this simulation uses the Revenue multiple approach.

Estimating the Value of a Business: Using EBITDA or Revenue comparables is typically less precise than using discounted cash flows, but is more practical in a Tool like this when it comes to estimating a value of an RIA firm. The valuation multiple is one factor that drives the value of the business at the time of sale. The multiple or the final calculation should not be taken as a valuation guideline. The actual multiple would be driven by many factors such as growth, transferability, depth of talent, quality of the client base, years in business and future involvement of the retiring producer(s).
Sunset Continuity Program
In wirehouses, the sunset continuity program is the amount of money an advisor is paid for their book of business when they retire.
Current Environment
The Current Environment is used when the advisor has previously earned a retention bonus or, at some point in the past, has accepted a forgivable loan to join their current firm. This is used when the advisor/team is still in the process of earning out that note and it becomes immediately payable should they leave.
New Environment
New environment applies to an advisor/team considering taking a check from a different wirehouse, bank, or brokerage firm (a full affiliation firm) that is offering a forgivable loan in return for a specified number of years of commitment to the new firm. Although new packages may range between 10 and 14 years in duration with multiple tiers of loans potentially earned at various thresholds, we have selected 9 years as the maximum to prevent the P&L from extending too many years into the future.
Fee-Based Revenue
Fee-based revenue, sometimes referred to as "revenue on assets" or "revenue on advisory assets," refers to revenue that comes from fees charged as a percentage of assets under management (AUM). You may choose to include the revenue generated by 12b-1 fees that may experience a future share class exchange to an advisory class. It may also include financial planning fees, insurance commissions, and referral fees. Forward populated from fee-based percentage of AUM
Non-Fee-Based Revenue
This amount is calculated by subtracting fee-based revenue from gross revenue. This amount may include more than just revenue generated by brokerage assets in the form of commission payments. Forward populated from fee-based percentage of AUM
Tier-Based Payout
RIA firms may compensate advisors/teams joining their firms in various ways. One method is through offering a payout grid where the payout percentage is determined by the gross revenue generated by the advisor/team. The tier-based grid that follows allows you to select payout thresholds that pay the advisor/team back to $1 at the higher tier once the gross revenue exceeds the stated threshold.
Annual Out-of-Pocket Expenses
These are the expenses the advisor/team pays without any support from the existing firm they are joining. Examples may include marketing and business development costs that only benefit the advisor/team and not the incumbent firm. From time to time, existing firms will offer a higher payout relative to their peers (approximately 70% or 80%), but will require the advisor/team to pay for local office rent and staff expenses.
Joining a Firm
Data used to create a join analysis is based on advisor inputs.
Direct Expenses
Enter the total of all owners salaries, retirement benefits and bonus.
Non-Owner Compensation Expenses
Enter the total of all non-owners salaries, retirement benefits, and bonus as a direct expense. Non-owners may include: Business Development Professionals and Client Relationship Managers.
Staff Salaries
Salary or bonus paid to administrative or support staff. Administrative Staff may include receptionists, administrative assistants, and dedicated management such as an office manager, technology administrator, Chief Operating Officer, or Marketing Director. Support staff includes research analysts, traders, service administrators, portfolio administrators etc.
Technology and Trading Expenses
List all costs related to CRM, Portfolio Accounting, Financial Planning, Research and Trading.
Compliance Expenses
Expertise and services that ensure the firm complies with all relevant federal, state, and firm regulations. In addition, this may include costs for any additional legal fees not related to compliance (e.g., routine legal issues or retainer).
E&O Expenses
List E&O expense for all assets including broker dealer and RIA assets.
Broker Dealer Fees
Administrative, charges on advisory assets, ticket charges, custody and clearing fees, or other fees paid to your current broker dealer which are not included on the practice profile.
Other Indirect Expenses
Indirect expenses includes: marketing, office expense, rent, insurance, utilities and any other misc expenses.
Staff Salaries
Staff Salaries expenses may be edited in the Start an RIA section. Edits made in the Start an RIA section will be reflected in the Semi-Captive section.
Non-Owner Professionals
Non-Owner Professionals expenses may be edited in the Start an RIA section. Edits made in the Start an RIA section will be reflected in the Semi-Captive section.
Staff Salaries
Staff Salaries growth rates may be edited in the Start an RIA section. Edits made in the Start an RIA section will be reflected in the Semi-Captive section.
Non-Owner Professionals
Non-Owner Professionals growth rates may be edited in the Start an RIA section. Edits made in the Start an RIA section will be reflected in the Semi-Captive section.
Owners and Overhead Growth Rates
Owners, Technology and Trading, Compliance, E&O Insurance, Broker Dealer and Other Indirect Growth Rates may be edited in this row. Editable values are highlighted in blue on entering a growth rate.

RIA Economic Discovery Tool

Practice profile
Current Practice
Adjust settings below to determine your earning potential.

Selected Business Model:

  • What are your assets under management?
  • What percentage is fee-based?
    Fee-based:80%
    0%100%
  • What is your average payout?
    Payout:40%
    0%100%
Anticipated Practice
  • How many total employees will make the transition?

    (Include all owners in the number of total employees.)

  • How many transitioning are principals/owners?
  • What percentage of assets under management do you expect to transfer?
    AUM Retention:100%
    0%100%
Valuing your firm

  • The RIA model enables owners to build equity that can be monetized when transitioning ownership.

  • RIA Firms can have a valuation of 1.5 to 3.3 times their annual revenue.

Analysis based on FP Transitions: The Succession Company, fptransitions.com.

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1An independent registered investment advisor (RIA) is a professional advisory firm that offers advice about securities, largely for a fee. RIAs are registered with the Securities and Exchange Commission (SEC) or their state securities regulator and are subject to the Investment Advisers Act of 1940.

2The calculations apply a multiple of 2.0 times revenue in the RIA model and 1.8 times revenue in the Full Affiliation model. This assumes that at the time of sale, the RIA model consists of 100% fee-based assets, whereas there is still a mix of fee-based and non-fee-based assets in the Full Affiliation model. The difference in comparable multiples is due to the unpredictable nature of the revenue generated by non-fee-based assets.

The Economic Discovery Tool (Tool) is intended solely for use by investment professionals. Please see: "Terms of Use and Important Information" prior to using the tool. The Tool simulates the pro forma financial results of various hypothetical scenarios for establishing, operating, joining and/or selling an investment advisory practice or firm and compares those simulated outcomes to various alternatives. The scenarios and alternatives covered are not exhaustive and may not be representative of those you actually encounter. Moreover, the simulated pro forma results are materially dependent on various assumptions and inputs, some of which are made and specified by you and some of which are static. These assumptions and inputs may not reflect actual circumstances, and thus the Tool is inherently limited and intended for general informational purposes only. The simulated pro forma results do not reflect, and are not guarantees of, actual or future results. Your actual results may be materially different than those simulated. Schwab makes no warranty of the accuracy or completeness of the Tool or the simulated pro forma results and shall have no liability for your use of the Tool. The Tool is not intended to provide financial, investment, legal, tax, or regulatory compliance advice. You are urged to consult your own professional advisors.

The results generated in this report are inherently limited and rely on certain assumptions, including information provided by the advisory firms and investment professionals that participated in the Charles Schwab RIA Benchmarking Study. Schwab did not independently verify Benchmarking information nor did it examine the investment performance or client service levels of the participating firms. The report may not be representative of others with similar circumstances and your results may vary significantly. See Terms, Conditions, and Assumptions for further details and assumptions.

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