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Success in Succession Planning
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What to Look for in a B/D’s Succession Planning Support

Advisors are increasingly reluctant to sell during this period of disruption and uncertainty without a greater level of commitment and ongoing support from their firms.

As concerns escalate across the United States about a potential “second wave” of coronavirus cases that could impact multiple areas of the country, it would be fair to say that the COVID-19 pandemic is continuing to significantly alter the stakes for independent financial advisors across many areas of their business, especially succession planning.

Indeed, in today’s new normal, advisors contemplating selling their practices and riding off into the sunset of retirement are under more pressure than ever before to get things right the first time.

While the two primary goals of any succession planning process—ensuring that clients are well taken care of and maximizing the sale value of the business—have not changed, to maximize their chances of achieving the best possible outcomes, advisors need to stay current on key emerging developments and ask where their current broker/dealer’s offerings stand.

Leaving aside ordinary course items of rising importance—such as cybersecurity and Reg BI implementation, for example—advisors are increasingly reluctant to sell during this ongoing period of disruption and uncertainty without a greater level of commitment and ongoing support from their firms.

Independent financial advisors who are exploring a succession planning–based sale of their business in a post-pandemic environment should not necessarily assume that this is not the right time for such a transaction. But they will need to ensure they have access to the following resources from their firms in order to get any such transaction right the first time:

Operational expertise to navigate industry changes: Many older advisors are considering retirement due to the impending requirements of Reg BI, the ever-increasing responsibility to improve cybersecurity or any of the other fundamental changes that continue to sweep the industry.

Firms that are serious about empowering advisors to achieve the best outcomes for retirement are increasingly making a commitment to deliver ongoing guidance and support to the buyer of a practice, long after the transaction has been completed. The more seamless the connection is between the newly expanded practice and the various subject matter experts throughout the firm it is affiliated with, the better equipped the acquiring advisor will be to successfully integrate the businesses and ensure optimal service to clients of the acquired business.

In-depth training for prospective buyers: Succession-minded advisors should seek out firms with established acquisition-readiness programs for the advisors in their networks. Before these prospective buyers make any concrete moves to purchase other practices, such programs help them prepare—strategically, operationally and financially—to put their best foot forward when combining a retiring advisor’s book of business with their own.

For selling advisors, these programs are crucial because they increase the likelihood of receiving a serious, viable offer from a qualified succession partner with whom they and their clients are actually compatible—rather than those who look good only on paper and whose acquisition proposals fall apart upon further scrutiny.

Robust matching platforms and strong transactional volume: In addition to having a bench of acquisition-ready advisors to tap into, a broker/dealer partner should have platforms that combine technology with dedicated human expertise to identify buyer-seller matches that fit both parties and their respective clients.

Moreover, they should have a track record of facilitating a high volume of succession-related transactions. This can be an important gauge of the firm’s ability to find appropriate succession partners and solve transactional issues such as structuring and legal challenges, as well as its familiarity with a suitable range of viable financing sources.

Third-party succession planning consultants may see higher transactional volumes than their in-house counterparts. One potential drawback to working with such third parties, however, is that they are unlikely to stick around after the initial transition period to ensure the long-term success of the union. In other words, a consultant’s focus tends to be on the transaction, not necessarily what comes after.

For any financial advisor, succession is the culmination of all their hard work and the “sweat equity” they have built over the course of their career. It stands to reason that they should approach this process as thoughtfully as possible, in order to reap the rewards of their years of focus and sacrifice.

Depending on their circumstances and the capabilities available to them through their current broker/dealer, it may make sense for advisors considering a succession planning–based sale of their business to change affiliations to a firm that can more effectively help them execute a smooth succession process.

Todd Fulks is senior vice president, succession planning and business acquisition, at Advisor Group.

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