One of the best things about financial advisors and wealth management professionals – you love your job. You enjoy the puzzle and the prospecting. You enjoy the paycheck. And you enjoy your clients. We know this because we know you. This is what you and your peers tell us every day on the phone, in emails, and at conferences.
This is why when it comes time to talk about an eventual exit and the “R-word” you wield so effectively with your clients, you brush off the conversation. You say, “It’s too early to talk about that, ask me again in five years.” And the next year you say the same thing, and the next, and the next, until suddenly it’s time and you just gotta work with what you’ve got.
On our side of the industry, we shake our heads and call it the “Rolling 5-Year Plan.”
Topics: Continuity Planning, Succession Planning, Talent Recruitment, Sustainability, Sell and Stay™
Your firm’s succession plan is designed to gradually transition ownership, leadership, and growth responsibilities to the next generation of advisors. The goal is sustainability of the firm, and it is accomplished through a plan that coordinates the changing roles of the founder(s) and the successor team over many years.
Selling equity in the business in a series of steps or “Tranches” gives both the founder and the next generation of owners the time to wisely manage the transition and to prepare for the changes to come. The transfer of ownership from the founders (G1s), to the second and third generation of owners (G2s and G3s), starts with Tranche 1. Tranche 1 is usually a sale of 10% to 20% of ownership to the next generation. Tranche 1 is often called the incubator stage and allows for all parties to test the waters and to prepare the business structure for the journey ahead.
Topics: Succession Planning, Business Growth, Next Generation, Building Your Team
In my work in years past, I became a professional traveler. I spent a lot of time in airports, and I got to talk to many of the pilots. Airline pilots are adventurous souls who enjoy finding ways to go faster, fly higher, and see things from a level that others cannot. They are also very methodical and go about everything with a checklist mentality, a clear purpose, and as much knowledge on the subject matter as they can muster. I find a lot of our entrepreneurial advisors to be cut from the same cloth. The goal of building something bigger, stronger, and better, helping clients better understand the financial world, and then sharing what they’ve built with others is woven into the very fabric of their being. Entrepreneurs like to improve and grow, and they like to do things right.
Growth, of course, can mean many things. You might want to grow your top line revenue and assets under management. Maybe you’re looking to hire and build your team in order to improve the client experience. Perhaps you want to acquire a practice, or two, to quickly grow revenue, assets, the client base, and your own income. But, just like a pilot who wants to go faster and fly higher, eventually you’re going to need a larger plane, a stronger engine and airframe, even additional skills that maybe you don’t currently have–or don’t necessarily have a passion for developing.
Over time, we’ve seen that independent advisors don’t naturally build large, profitable, sustainable businesses. The ambition might be there, and recurring, fee-based revenue certainly helps the cause, but the skill sets that prompt most independent advisors to hang out their own shingle and start gathering clients who trust you with their financial goals and assets are different than what it takes to run an organization of professionals and create scale. For these reasons and others, this is still more an industry of book builders than it is of business builders.
Topics: Compensation, Succession Planning, Organizational Structure, Business Growth, Entity Structure, Sustainability, Building Your Team
Purpose, perspective, and premise are the foundations of business value. With these three key aspects we can weigh an incredible amount of detail and data to determine the most accurate value of the business–for any circumstance. The more accurate the value, the better the outcome of your situation, and the better your ability to plan ahead for future growth and higher profits.
Everything starts with “why.” What is the purpose for the valuation? As we like to say, “value is in the eye of the beholder,” and purpose allows us to pinpoint that perspective to know what makes a business valuable to them. And when we drill down into situational specifics and the nuances of perspective, we can understand the future-state of the business and the premise of the valuation to fine tune its accuracy.
Topics: Succession Planning, Business Growth, Business Value, Benchmarking, Valuation & Appraisal
Experienced business owners recognize the importance of tracking and monitoring their firm's value over time. They know this business is one of their largest assets, and by measuring and monitoring it, they are enabling its growth, protecting its value, and ensuring a sustainable - and profitable - future. Understanding value and monitoring it over time is the starting point for every business plan: organic growth, acquisition, succession, talent recruitment, everything.
Topics: Continuity Planning, Succession Planning, Continuity, Sustainability
M&A Gusto Continues: FP Transitions Rallies to Meet Demand
Independent advisory firms continue to tap FP Transitions for valuation, transaction support and non-advocacy consulting on mergers, sales and acquisitions.
National wealth management consulting firm, FP Transitions, reports a continuous surge in independent financial advisor mergers, sales and acquisitions. With deal flow rivaling that of last year, the company adds another round of lawyers, analysts and industry consultants to its M&A and consulting teams. With more than 70 inquiries for each opportunity, FP Transitions’ data shows market demand continues to outpace supply, and is further fueled by a growing appetite of next generation owners (G2s) engaging in ownership earlier than prior generations.
This momentum of G2s seeking ownership paths has created greater opportunity in the independent space, and FP Transitions’ CEO and principal, Brad Bueermann, cites a ripple effect across the industry. “For decades, FP Transitions has focused on preparing both owners and next generation owners to establish, build and transition firms from one leadership team to the next. What we’re seeing now is a culmination of those efforts meeting the essential demands of 100,000 advisors gearing up for retirement by 2042.” Of these retiring advisors, Cerulli data indicates nearly 45% are planning an internal transfer of ownership to an employee or family member.
Topics: Succession Planning, Announcements, Buying & Selling, State of the Market, Press Release, Press Releases
If you are preparing to become the successor of an RIA firm, you may have a lot of questions and concerns about how to negotiate the best deal and what lending options are available to help you finance the succession.
To help you answer these questions, Alicia Chandler, President and Susie McEuen, Strategic Markets Vice President of Oak Street Funding sat down with FP Transitions’ Director of Valuations, Aaron Wells, and CFO, Eric Leeper, to share their insights and tips on what successors need to know.
Topics: Continuity Planning, Succession Planning, Deal Structure, Continuity, Sustainability
What we wish everyone knew about succession planning.
We sat down with lenders, analysts and valuation experts to talk about what really happens in succession planning. Four seasoned professionals weighed in, and the answers are remarkably candid.
Many advisors forget to view their financial advisory business as their largest personal asset. Focusing on clients is imperative, but caring for your firm is also an exceptionally important part of this. Leveraging experts like FP Transitions to develop a robust and tailored succession plan means hiring a team of professionals who know every. single. thing. about succession planning for financial advisors.
Topics: Succession Planning, Acquisition, Financing, Transition Plan, Valuation & Appraisal, Transactions
Often used interchangeably, the terms Continuity Plan and Succession Plan refer to very different business planning elements. Continuity plays an essential role in defining what happens upon a “triggering event”– sudden absence, disability, death or otherwise, while succession refers to an intentional plan that brings multiple generations of owners into the business, typically over 10-15 years, to carry it forward for decades to come. We refer to this goal as sustainability.
Topics: Continuity Planning, Succession Planning, Continuity, Sustainability
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Great opportunity comes often with great risk. But just as importantly, and far more prevalently, everyday challenges wear on us, too. How many times have you had the same conversation with a client about opening that 529? Or upping that 401k contribution? They want to do it – so they say – but they keep showing up for meetings without having done it.
Topics: Succession Planning, Business Value, Transition Plan, Continuity, Sustainability, Leadership, Valuation & Appraisal, KPI, marketing, valuation