Executive summary
Advisors guide others to a secure retirement. Few plan their own.
In an industry where guiding others to financial security is paramount, wealth managers and financial advisors must also navigate their own path to a successful retirement. This paper explores the exit strategies available to advisors across all channels, the potential returns of each, and the considerations that come with them, so you can make an informed decision about your professional future and your legacy.
The wealth management and financial advisory sectors are at a crossroads. As the baby boomer generation of advisors approaches retirement age, the industry faces a significant transition. According to a 2022 study by Cerulli Associates, nearly 37% of advisors are expected to retire within the next decade, representing over $10 trillion in assets under management. That impending shift is what makes a well-planned exit strategy matter now.
At Spartan, the best exit strategy is the one that maximizes your financial return and prioritizes the well-being of your clients. We are not a competitor recruiting you, and we are not a broker-dealer or a custodian. Our focus is helping you understand every channel and option available, which usually leads to a smoother transition, a higher valuation, and a better outcome for everyone involved.
The retirement wave, by the numbers
Run on one identical practice, the six strategies in this paper produce estimated outcomes from $6.0 million to $21.8 million. The choice of path is worth more than most advisors assume.
Section 01 · Who this is for
W-2 and wirehouse advisors at a crossroads.
This paper is written for advisors currently employed in W-2 positions at wirehouses or other traditional brokerage firms. If you are in one of these five situations, it is written for you.
- 01
Nearing retirement
A seasoned advisor with decades of experience, contemplating your exit from the industry and seeking to maximize the value of your practice.
- 02
Mid-career evaluation
In the prime of your career, reassessing your options and considering whether to stay the course or explore models that offer greater independence or financial upside.
- 03
Early-career decision-making
A rising star in your firm, looking ahead and strategizing about the best long-term path for your career and your clients.
- 04
Constrained by the current model
Feeling limited by your current firm and curious about options that offer more flexibility, higher payouts, or greater control over your practice.
- 05
Watching the industry change
Tracking increased regulation, changing client demographics, and technological disruption, and wanting to position yourself advantageously for the future.
Section 02 · The six strategies
Six primary exit and retirement strategies.
Unlike the 1990s, when advisors had limited choices, today’s landscape is far more complex. Each strategy below carries its full case, the reasons advisors choose it and the considerations that come with it, followed by the economics run on the same practice: $400 million in assets, a 0.75% return on assets, $3 million of annual production, and five additional years worked.
Strategy 01
Stay at your current firm and leverage its retirement package
Remain with your firm and opt into its established retirement plan. These plans typically pay 1.0x to 2.5x annual production over five years, and generally require you to transition your book to another advisor or team within the firm over three to five years. During that period the retiring advisor usually receives a percentage of ongoing revenues, as high as 50% in the first year, decreasing over time.
Why advisors choose this
- Risk-averse choice with predetermined results
- Minimal disruption to existing client relationships
- Longevity at the firm can build additive benefits such as deferred compensation
- Familiarity with firm culture, systems, and processes
- Established colleagues who can take over the book of business
- Potential bonuses for smooth transitions or high asset retention
- Avoids the complexity and client loss of changing firms
Considerations
- Requires a trusted individual or team inside the firm to take the book, and the success of that transition drives the payout
- Generally a lower retirement payout, 1.0 to 2.5 times production, than other options
- Limited flexibility, since terms are predetermined by the firm
- Non-compete clauses may limit future involvement with clients or the industry
- May not maximize the overall value of the practice
- Payout structured over three to five years, which may not fit every plan
- Future changes to the firm's program could affect long-term benefits
Example · Stay at your current firm
Strategy 02
Transition to another W-2 firm, then retire
Move to a different W-2 firm and leverage its retirement program, typically working an additional five to seven years before becoming eligible. Transition packages are at all-time highs, structured as upfront and backend payments, often a forgivable loan over seven to eleven years. Deals can run 3x to 4x trailing twelve-month production, plus a further 1x to 2.5x at retirement. Some advisors transition and retire at the new firm, yielding 5x to 6.5x trailing twelve all in, after five to ten years at the new firm.
Why advisors choose this
- Substantial transition packages at all-time highs, much of it front-loaded, so the capital can be invested from day one
- Deals of 3x to 4x trailing-twelve production, plus a further 1x to 2.5x at retirement
- A fresh start with new resources and support systems
- Access to potentially better technology and client-service platforms
- A chance to rebrand and accelerate practice growth
- Possible early loan forgiveness if you enter the new firm's retirement program
Considerations
- Requires an additional five to ten years of work before the new firm's retirement benefits vest
- Potential disruption to client relationships during the transition
- Adapting to a new firm culture and operational processes
- Carefully structured deals are often needed to maximize the benefit
- Backend bonuses depend on meeting asset-transfer or growth targets
Example · Transition to another W-2
Strategy 03
Move to an independent broker-dealer, then sell the business
Affiliate with an independent broker-dealer as a 1099 contractor, operate for three to five years, then sell. Independent broker-dealers often provide transition assistance, including upfront capital, technology, and marketing support. Payout ratios run roughly 80% to 92% of production, with net take-home typically 60% to 70% after real estate, support staff, insurance, and other business expenses.
Why advisors choose this
- 1099 independent-contractor status, with potential tax benefits
- Higher payout ratios, typically 80% to 92% of production
- Transition assistance often provided by the broker-dealer
- Greater freedom over client selection and business practices
- Potential for a higher practice valuation at sale
- Ability to run both advisory and broker-dealer business
- Can be paid on insurance, annuities, and other broker-dealer business
- Possible long-term capital-gains treatment at exit
Considerations
- Regulated by FINRA under the suitability standard
- Responsible for your own business expenses and operations
- May require additional licensing or certifications
- A learning curve for new systems and processes
Example · Independent broker-dealer
Strategy 04
Adopt a hybrid RIA model
Operate as both a registered investment advisor and a broker-dealer affiliate, keeping your securities license for commission business while running your own RIA for fee-based assets. After establishing the hybrid, advisors typically operate for three to five years before selling. Net payout runs roughly 65% to 75%, and the model allows diverse revenue from both fee-based and commission-based services.
Why advisors choose this
- Offer a wider range of products and services to clients
- Keep commission-based business while shifting toward a fee-based model
- Diverse revenue streams that can raise overall profitability
- Build equity in a sellable asset
- Often an easier transition for advisors coming from traditional broker-dealers
Considerations
- Increased compliance and operational complexity, under both SEC and FINRA oversight
- Careful management of potential conflicts between fee-based and commission services
- May require additional licensing and certifications
- A more complex structure can raise operational costs
- Valuation can be harder with mixed revenue streams
Example · Hybrid RIA
RIA exits are generally struck on EBITDA, shown here as a revenue multiple for illustration.
Strategy 05
Join a large RIA aggregator, consolidator, or supported-independent platform
Join a larger RIA platform that supplies compliance, trading, operations, and marketing, then operate for three to five years before a full exit. This model is particularly attractive to ex-wirehouse advisors who want to focus on wealth management without the full responsibilities of running an independent business.
Why advisors choose this
- Access to established infrastructure and support services
- Focus primarily on client relationships and wealth management
- Potential equity participation in the larger organization, and significant value at exit
- A smoother path to independence than starting a standalone RIA
- Possible revenue-sharing arrangements with the aggregator
- Several routes to liquidity, including loans, notes, or selling a minority stake
- Economies of scale that can lift margins and exit value
Considerations
- Less flexibility in choosing technology and services than a fully independent model
- Revenue sharing with the aggregator can reduce short-term income
- Adapting to the aggregator's culture and operational processes
- Possible limits on investment choices or service offerings
- Exit options may be shaped by the aggregator's overall strategy
- Exit valuation depends on both your practice and the aggregator's own valuation
Terms vary deal to deal and typically include an equity stake in the aggregator, with a 4x to 5x exit multiple on revenue. Because the structure is negotiated case by case, this strategy carries no single worked example.
Strategy 06
Establish your own RIA and own 100% of it
Create your own independent RIA, operate for three to five years, then sell. This entrepreneurial path requires more upfront investment and carries the highest regulatory responsibility. As an owner you have full control over your business model, operations, fee structures, and service models, which can drive the highest profit margins and the highest valuation, typically 6x to 8x annual revenue for well-run firms.
Why advisors choose this
- The highest practice valuation, typically 6x to 8x annual revenue for well-run firms
- Full control over your business model, operations, and client relationships
- Build equity in a sellable asset
- Flexibility in fee structures, whether asset-based, hourly, or flat
- A chance to create a unique brand and service offering
Considerations
- Need to obtain the Series 65 license
- Higher regulatory responsibility, including SEC oversight
- Significant upfront investment and planning
- Responsible for all aspects of business management and operations
- A learning curve for new systems, processes, and management
- May require additional staff or outsourcing
Example · Your own RIA
RIA exits are generally struck on EBITDA, shown here as a revenue multiple for illustration.
Exhibit 01 · Estimated total value to the advisor, one $3M practice
The same practice, five worked examples, a spread of nearly $16 million. The RIA path shows the highest potential exit and carries the most risk and the steepest learning curve. Strategy 05 varies deal to deal and is not plotted.
Exhibit 02 · The strategies compared
Payout column reads as a multiple of annual production at exit, except strategies 03 and 04, which show the ongoing payout ratio. The right path is the one that fits the practice, not the one at the top of the table.
Section 03 · Pete’s insights
What thirty-three years on the firm’s side of the table teaches.
- On staying at your current firm
- While this option offers stability, it may leave money on the table. Consider your long-term goals and client relationships when evaluating this path.
- On moving to another wirehouse
- This can be a lucrative short-term liquidity event.
- On the independent broker-dealer
- This path offers a good balance of independence and support. Success here often depends on your ability to adapt to a more entrepreneurial role.
- On the hybrid RIA
- The hybrid model can offer the best of both worlds, but it requires careful management to navigate potential conflicts and complexities.
- On the aggregator
- This option can provide a smoother path to independence, but be sure to thoroughly evaluate the long-term implications of the equity structure.
- On establishing your own RIA
- The RIA model offers the highest potential exit, and also the most risk. It is ideal for those with a clear vision and strong business acumen.
Conclusion
The optimal strategy depends on your circumstances.
The choice of exit strategy is a critical decision that affects not only your retirement but the future of your clients. Staying with your current firm offers stability. Transitioning to another wirehouse, moving to an independent broker-dealer, adopting a hybrid model, joining an aggregator, or establishing an RIA can potentially yield higher returns. The optimal strategy depends on individual circumstances, risk tolerance, and long-term goals. Consider your options carefully, taking into account your personal goals, your clients’ needs, and the changing landscape of the industry.
Terms and definitions
The vocabulary of the transition.
1099
Independent-contractor status, common in independent models. Advisors carry their own expenses and taxes but often keep higher payout ratios.
Affiliation model
An arrangement with a larger organization by contract. In wealth management, an affiliated advisor keeps some independence while using the parent's resources, brand, or infrastructure.
Hybrid RIA and B/D
A model where an advisor operates both as an RIA and a broker-dealer affiliate, allowing fee-based and commission-based business.
Independent broker-dealer (IBD)
A broker-dealer that supports independent advisors, typically with higher payout ratios than wirehouses. Affiliated advisors are usually 1099 contractors.
Independent RIA
An independent firm registered with the SEC or state regulators, providing investment advice under a fiduciary duty to act in clients' best interests.
OSJ (Office of Supervisory Jurisdiction)
A branch of a broker-dealer delegated supervisory responsibility for other branches or representatives.
Supported independence
A model offering the benefits of independence while providing support in areas such as technology, compliance, and operations.
RIA aggregator / consolidator
A firm that acquires or partners with multiple advisory practices, offering centralized support, technology, and liquidity options.
Private-equity-backed RIA
An RIA that has received funding from, or is owned in part by, private-equity firms, often aiming for rapid growth and eventual sale.
Custodian
A financial institution that holds and safeguards clients' securities and assets.
W-2
An employment status where the advisor is an employee of the firm, receiving salary and benefits. Common at wirehouses and some regionals.
Wirehouse
A full-service, typically large national broker-dealer offering a wide range of financial services.
Boutique firm
A full-service wealth management firm geared toward higher-end clients, often combining elements of wirehouses and RIAs, with advisors joining as W-2 employees.
Regional broker-dealer
A firm operating in a specific region with services similar to wirehouses, often offering both W-2 and 1099 models.
Private bank
An institution providing wealth management, banking, and lending to HNW and UHNW clients, usually with a salary-plus-bonus advisor model.
The Protocol for Broker Recruiting
A 2004 agreement among major firms to reduce transition-related litigation, letting departing advisors take limited client information when moving between Protocol firms. Many firms have since withdrawn.
Broker-dealer (B/D)
A firm or individual licensed to buy and sell securities for its own account or for customers, regulated by FINRA under the suitability standard.
AUM (assets under management)
The total market value of assets an advisor or firm manages on behalf of clients.
Basis point (bps)
A unit of measure equal to 0.01%, or one hundredth of a percent.
EBITDA
Earnings before interest, taxes, depreciation, and amortization; a common basis for RIA valuations.
EBOC
Earnings before owner's compensation; profitability before the owner's own salary.
Fiduciary
A person or entity with a legal and ethical obligation to act in the best interest of clients. RIAs are held to a fiduciary standard.
FINRA
The Financial Industry Regulatory Authority, which oversees broker-dealers and their registered representatives.
Payout ratio
The percentage of revenue or commissions an advisor keeps. Independent models typically offer higher payout ratios than employee models.
Production
The total revenue an advisor generates annually, including fees and commissions.
SEC
The Securities and Exchange Commission, the primary federal regulator of RIAs with more than $100 million in assets.
Suitability standard
A standard requiring that recommendations be suitable for the client, applied to broker-dealers and generally considered less stringent than the fiduciary standard.
Trail commission
An ongoing fee paid to an advisor for maintaining a client's investment, often associated with mutual funds or annuities.
Form ADV
A required disclosure document RIAs file with the SEC, detailing business practices, conflicts of interest, and disciplinary history.
TAMP
A turnkey asset management platform providing outsourced investment management, including manager selection, portfolio construction, and rebalancing.
Pete Secret
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Source · Spartan Advisory Partners, “Maximizing Value: Exit / Retirement Strategies for Wealth Managers and Financial Advisors” · Cerulli Associates (2022) · Figures are pre-tax and illustrative, not a quote. This is not legal, tax, or investment advice.