Succession Planning for Financial Advisors: Building an Enduring Business Best Sellers Rank : #3
- 4 years ago
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Ninety-five percent of independent financial service professionals are one-owner practices. To the positive, these practices are among the most valuable professional service models in America. But almost all are assembling their practices using the wrong tools - tools borrowed from historically successful, but vastly different models including wirehouses, broker-dealers, and even OSJ's and branch managers. Revenue sharing, commission splitting and other eat-what-you-kill compensation methods dominate the independent sector and virtually ensure that today's independent practices, if left unchanged, will not survive the end of the founder's career. Independent business models need different building and assembly tools because of one major difference - independent advisors own the value they're building, not the BD or custodian they are under. It's no longer about having a job.Much of this problem could be solved, or at least substantially mitigated, if one were to assume that independent practice owners would eventually sell or otherwise intentionally transfer their client relationships to another, younger advisor or to a larger firm upon retirement. But the data on this point is clear as well. Entrepreneurs rarely sell, preferring instead to hold on to their revenue producing practices as long as possible and unnecessarily exchanging the ongoing cash flow for the equity value and ability, perhaps duty, of professionally transferring the relationships and assets to a hand-picked successor who could perpetuate the services. This book will discuss the solution to this problem.The book will cover: Practice valuation, benchmarking and "equity management"Development and design of customized succession planning structuresRestructuring ownership compensation to support internal ownership tracksSetting up an equity-centric ensemble organization structuresCreating or modifying entity structures to work for generations of ownersCash flow modeling a variety of continuity and succession planning solutions
Ninety-five percent of independent financial service professionals are one-owner practices. To the positive, these practices are among the most valuable professional service models in America. But almost all are assembling their practices using the wrong tools - tools borrowed from historically successful, but vastly different models including wirehouses, broker-dealers, and even OSJ's and branch managers. Revenue sharing, commission splitting and other eat-what-you-kill compensation methods dominate the independent sector and virtually ensure that today's independent practices, if left unchanged, will not survive the end of the founder's career. Independent business models need different building and assembly tools because of one major difference - independent advisors own the value they're building, not the BD or custodian they are under. It's no longer about having a job.Much of this problem could be solved, or at least substantially mitigated, if one were to assume that independent practice owners would eventually sell or otherwise intentionally transfer their client relationships to another, younger advisor or to a larger firm upon retirement. But the data on this point is clear as well. Entrepreneurs rarely sell, preferring instead to hold on to their revenue producing practices as long as possible and unnecessarily exchanging the ongoing cash flow for the equity value and ability, perhaps duty, of professionally transferring the relationships and assets to a hand-picked successor who could perpetuate the services. This book will discuss the solution to this problem.The book will cover: Practice valuation, benchmarking and "equity management"Development and design of customized succession planning structuresRestructuring ownership compensation to support internal ownership tracksSetting up an equity-centric ensemble organization structuresCreating or modifying entity structures to work for generations of ownersCash flow modeling a variety of continuity and succession planning solutions