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What Should Your Practice Finish Before December 31, and What Can Wait for Q1?
Close what is open before year-end, and start what takes time in Q1. Your contingency plan, employment agreements and next year's compensation plan belong on the December list. Your entity, equity plan and valuation refresh take longer, so they start in Q1.
In this session, Succession Resource Group's David Grau Jr., MBA, Founder & CEO, lays out a year-end playbook for advisory firm owners: what to finish now and what to start in the new year.
David explains why life insurance is not a contingency plan and how a retention clause, not a discount, handles the risk of a sudden exit. He shows the LLC owned by S-Corps structure he recommends for growing firms, how a base, bonus and profits compensation model can lift profit from 22% to 33% of revenue on a $3M firm, and why garden leave is often more enforceable than a non-compete. He maps phantom and real equity into a 15-year path to partnership and closes with current valuation multiples of 3.27x recurring revenue and 9.98x EBITDA. Owners heading into planning season who want a clear Q4 and Q1 priority list will find this a practical roadmap.
Host
David Grau Jr., MBA, Founder & CEO
David Grau Jr. is the founder and CEO of Succession Resource Group, a succession and M&A consulting firm for financial advisors. A published author, U.S. Navy veteran, and one of the industry's most recognized voices on advisor M&A and next-generation building strategies, David has delivered more than 200 presentations at leading financial services firms nationwide.
Frequently Asked Questions
What should advisory firm owners finish before December 31?
A signed and funded contingency plan, employment agreements in writing for client-facing advisors, and a compensation plan set for the new year. These close out work that is already open, and most can be completed in a few weeks.
Is life insurance enough for a contingency plan?
No. Insurance can fund a plan, but it does not name a successor, set a value or protect client relationships. A working plan sets the value, decides how it is funded, puts the agreement in writing, is shared with clients and staff, and is reviewed every year. Most are funded from cash flow through a promissory note, with a retention clause that accounts for the risk of a sudden exit.
What entity structure works best for a growing advisory firm?
For most firms, an LLC taxed as a partnership as the operating entity, with each owner holding their interest through their own S-Corp. The LLC keeps the flexibility you need for equity sharing, mergers and multiple member classes, and the S-Corps keep the tax benefits. Start the change in Q1, since amendments and tax elections take weeks.
Should I offer phantom equity or real equity to my team?
Most firms start with phantom equity, usually an appreciation rights plan. It gives key people a stake in future value without ownership, voting or shared financials, and it is easy to modify. In SRG's experience, 64% of firms choose phantom equity. Real equity can come later as part of a career track, often non-voting first and voting for a select few.
