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Key Considerations for Building a Multi-Generational Firm

There's nothing "turnkey" about building a business that can thrive for decades to come.

Market prognostication is an entertaining hobby but a mostly frustrating one. What’s more, those who get it right one week are often wrong the next. As advisors, you understand that. Most of us can’t see around corners, much less fully anticipate how the decisions we make today will impact us years from now. But what we can do, and what our clients look to us to do, is plan.

The same holds true for advisors who find themselves looking to travel the road for independence with the long-term goal of building a sustainable, multi-generational firm.

There is no shortage of opportunities for successful financial advisors seeking to go out on their own. But many of these “opportunities” are purely transactional – the business proposition goes roughly like this: you bring us your clients and, for a fee, we’ll provide a platform and access to technology and investment products.

The word “turnkey” is often used to describe these services, and that’s generally true. And for many this all that’s needed—a product agnostic platform that allows them to provide conflict-free advice and spend more time marketing.

But there is transactional, and then there is generational. Those advisors seeking independence as a means of building a business that can not only function but thrive for decades to come have a more extensive set of considerations. Key among them include:

  • Ownership structure. It may seem mundane, but how a company incorporates in year one can impact the ability to transition ownership decades later. Should you be an LLC? An S Corp? Which structure provides the best tax advantages now, while also protecting your ability to migrate your business to the next generation?
  • Technology. Next to personnel, technology tends to be a firm’s biggest cost. The platform(s) you choose presumably meet your immediate needs, but how do your providers plan to evolve it as new technologies become available? A failure to keep pace can quickly undermine your ability to attract younger investors whose expectations for personalization and connectivity are likely to be much different from that of older clients, and can have much the same impact when it comes to attracting and retaining younger talent.
  • Compliance. Compliance errors can be costly and damaging to both your reputation and your balance sheet. Some can even threaten the viability of the business. Defining a methodology for managing compliance issues while not unduly burdening your organization is critical.
  • Access to third party services. Are you captive to in-house custodians and other providers or do you have access to third party vendors that can be easily integrated into the platform?
  • Marketing. Why should someone choose you? What niche can you fill? What underserved corner of the marketplace can you make your own? How do you tell your story? Do you even know what your story is? Having strong answers to all of those questions and more will help your firm stand out and start to build the kind of reputation that will help forge a path toward long-term growth and sustainability.
  • Compensation. You have to get paid, and so do your employees. Turnover is damaging for any business, no matter how long it’s been around. Compensation needs to be structured to support both the short- and long-term objectives of the business.

The Road to Where?

The opportunities for the entrepreneurial advisor are massive, but if you’re reading this, you already know that. You might already be at the point of starting to map out your own road to independence. But with any road metaphor, what’s often missing is the destination.

If your goal is the construction of a thriving practice that will be helping investors on their own road to retirement, paying for college, or whatever destinations they might have in mind long after you’ve retired, then the list of topics above is an excellent starting point in determining the steps needed to make that goal into a reality. 


Trey Prescott is Director of Business Development with Advisory Services Network.

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