AmeriFlex RIA acquisition model aims to keep sellers on board

From a distance, the increased pace of consolidation across the wealth management space can look like a one-way street of independent advisory firms being absorbed by aggregators as aging advisers migrate toward the beach.

A closer look, however, exposes a more nuanced reality. Despite the headlines touting reports of 10,000 baby boomers turning 65 every day, veteran advisers aren't all ready to hand over the keys and walk out the door.

That's paving the way for a fruitful enterprise operating as The AmeriFlex Group that has introduced succession planning as a gradual process that even includes an option to reverse the sale of a registered investment adviser.

Launched in July 2019, AmeriFlex is designed to make the transition to retirement and the sale of an RIA gradual and flexible, according to Thomas Goodson, its president and chief executive.

“When an adviser sells his business, it’s usually binary, where you sell 100% and then you’re 100% out, because most buyers and aggregators want the seller out,” he said. “But we are allowing the seller to fade into retirement on their own terms.”

For starters, AmeriFlex begins its acquisitions by purchasing between 1% and 49% of the recurring revenue stream. Goodson said the acquisition range so far has generally been between 25% and 45%.

For example, if an adviser agrees to sell a third of $1 million worth of recurring revenue, Goodson said his firm will “buy that for a multiple greater than the market will pay.”

“The reason is, there’s a bigger picture,” he said. “The plan for AmeriFlex is to get to 315 partner advisers in three years.”

To date, AmeriFlex has grown to nearly 100 advisers and more than $6 billion by purchasing minority stakes in RIAs. Goodson couldn’t disclose the details, but said the company is close to turning a minority ownership stake into its first full acquisition.

Last week, Las Vegas-based AmeriFlex announced an $8 million payout to nine financial advisers as part of its SuccessionFlex program, which is designed for advisers within five years of retirement.

Launched in November 2021, SuccessionFlex allows advisers to authorize a succession and continuity agreement that includes an option, before retirement, to sell 30% to 40% of their current revenue stream to The AmeriFlex Group, with no minority ownership discount.

No equity changes hands at the time of the agreement, and the only requirement is that the adviser remains affiliated with AmeriFlex. Advisers can agree to sell to either The AmeriFlex Group or another affiliated partner adviser.

“We’re a safety valve for the adviser that wants to cross the succession bridge but doesn’t want to do it in a binary way,” Goodson said. “They keep the name and keep control of the practice.”

AmeriFlex also incorporates a walkaway provision that includes a declining payback option over 10 years.

For example, if AmeriFlex pays a multiple of three times $300,000 worth of recurring revenue, or $900,000, the adviser can buy the ownership back after 12 months and one day for 95% of $900,000.

The buyback price drops by five percentage points per year to the point where after 10 years the adviser could buy back the $900,000 stake for $450,000.

SuccessionFlex was created by Goodson and his senior leadership team in collaboration with strategic adviser Larry Roth, the former CEO of Cetera and Advisor Group, who's CEO and managing partner of RLR Strategic Partners, a boutique M&A and strategic advisory firm.

“With reports of 40% of the financial adviser population looking to retire over the next 10 years, I believe SuccessionFlex is the right program at the right time,” Roth said in a statement.

“Exiting the business is a decision that shouldn’t be made in a vacuum, since it has wide-ranging implications for an adviser’s family, staff and clients,” he said. “We developed SuccessionFlex to take some of the uncertainty out of the succession process, relieve much of the burden and allow advisers to start monetizing their practices while still working.”