At a time of unparalleled global social-political uncertainty accompanied with continued market volatility, an increasing number of advisors are moving to a compensation model that provides certainty at the present rather than equity modelling in the distant future. And given the ongoing market uncertainties, established independent brands offering attractive cash-based programs are becoming the clear winners. It provides a measure of comfort and security advisors now seek. 

Time and time again, we have heard too many horror stories of private independent Canadian broker dealers doing shareholding ‘re-evaluations’, having early sell outs and liquidity issues: The truth remains: Wealth advisors really don’t know what they are getting into when they go in– and they certainly don’t know what their exit strategy is going to look like getting out. Why buy equity in a private stock when you cash a healthy bond yield today?

No matter how glamorous the projected glossy valuations may appear to entice advisors; just like the stock market, nobody can predict a five – year time horizon. That’s a lot of time and effort to expend for an unpredictable outcome!

A simple multiple on revenues tells an advisor what he/she would receive going into the game-and the same defined formula tells the advisor exactly what their exit looks like going out. The advisor doesn’t need to worry about revised shareholding valuations, potential early sell outs, or depending on other advisors to grow their own business to assess the viability of their own liquidity event. There are simply too many variables beyond his/her control that only result in unnecessary, adverse consequences. 

Wealth Advisors have enough to contend with, dealing with their own clients and market challenges. They certainly don’t need to add to their woes, worrying about the existential future and ongoing complications of their own dealer.

If an Advisor is reluctant to sell a ‘private’ security to their own client, then why would they work in one! 

Holding stock in a private company robs the advisor of having control over their own business. It is often an illusory promise that quickly fades. A cash – based transaction allows the Advisor the ability to control the exact time and value of that liquidity event. In these turbulent times, it is the one certainty they can count on. 
Advisors get paid to provide their clients with peace of mind. Investment Advisors are people-consumers too: they are certainly entitled to the same comfort. And in a highly turbulent world, only a cash – based transaction provides him /her with that measure of safety.