The Future of Business Growth with Julia Sexton (Ep. 13)

IMPACT®2024

Meet Our Team Nicole Sinclair Craig Chanti Sabrina Powell We enjoyed seeing you this year! Your business goals remain top of mind as we enter the new year. From equity sharing to succession planning, our team is here to help you navigate any complexities you’re facing. Click below to schedule a call with our team! You can also download our 2024 Advisor Mid-Year M&A infographic here. LET’S TALK Major Decisions, Massive Expertise Valuing, growing, and transitioning a business isn’t simple, but it doesn’t have to feel overwhelming. We unravel the complexities, bringing all the necessary disciplines (consulting, industry expertise, legal, tax) together as a unified solution, leading with education and clarity so you feel confident and empowered to make the best decisions for your business. LEARN MORE Gain Total Firm AlignmentEquity sharing is a formidable strategy for aligning next generation owners and top talent with your firm’s goals. Implementation can take several forms, and we’re masters in crafting and executing plans that minimize risk and maximize rewards.Click HereFind The Right PartnerAs an owner, you need an ideal match to propel your firm forward and secure your legacy. Whether merging, selling or creating an internal succession plan, you have options, and we can help you pick the best one.Click HereDiscover Solutions for GrowthFrom entity design to acquisition prowess, we’re masters of business foundations. We always start with a valuation and then optimize your growth strategy, working hand-in-hand with you every step of the way.Click Here Previous slide Next slide Let’s Talk About You & Your Goals Whether you’re looking to grow, find a partner, or sell your firm, we’re here to help! LET’S TALK

Successful M&A and Financing Strategies with Parker Finot (Ep. 12)

Advisor NextGen Talent Sourcing and Training Strategies (Ep. 11)

Employee Retention Guide for Advisors – 2024 ed.

Strategies to Fortify Employee Retention and Minimize Advisor Turnover In the fast-paced and competitive realm of financial services, the role of employee retention strategies has never been more critical for registered investment advisors. Independent advisors understand that retaining a skilled and dedicated team is as essential as acquiring new clients and expanding services. This article explores the multifaceted world of employee retention, providing insights into what the most effective advisory firms are doing today.   The Paramount Importance of Employee Retention Retaining talent is a key element to scaling a business, sustaining growth, and maintaining a steadfast commitment to clients. The financial services sector faces not only industry-wide competition but also a scarcity of talent. Given the substantial investments in training financial advisors, employee retention emerges as a pivotal factor for the sustained success of financial services firms.   Establishing the Pillars of Success A robust employee retention strategy begins with a foundation rooted in three foundational steps: well-crafted employment agreements; intentionally designed compensation plans; and a career path to partnership.   This foundation should seamlessly align with the overarching business goals of your advisory firm, fostering team retention through clearly defined roles, comprehensive job descriptions, structured pay bands, and thoughtful equity/profit-sharing strategies (reserved for the most elite and impactful team members).   Defining Roles Clearly delineating positions within the firm, from your operations and administrative team members to your C-suite and everything in between, lays the groundwork for an effective employee retention strategy. Outlining the various roles on your team, even if many of the roles are covered partially by the same person until the business grows and can justify narrowing people’s scope, is critical to make sure both you and your team understand the team’s needs in advance. Recruiting is something firms should never stop doing, and having a clear understanding of the next hire and roles needed can ensure strategic hires are accretive and done proactively.   Crafting Job Descriptions Each position within your firm should come with detailed job descriptions that outline roles, responsibilities, expectations, and required skills. It is also important to ensure that the job descriptions are continually refined. As the firm grows, job requirements will gradually narrow, allowing team members to specialize and gain efficiencies. The narrower job requirements generally also make it progressively easier to find talent to fill such roles, as opposed to hiring a generalist that has skills across multiple disciplines.   Formulating an Equity/Profit-Sharing Strategy There’s an old saying, “No one washes a rental car.” The point of the saying is that behaviors change when there is a sense of ownership. This is directly applicable to the professionals on a team. When they feel “invested,” they tend to approach the business differently. To foster a sense of ownership and create greater alignment with your employees, it is worth considering ways to give them a sense of ownership. ➡️ Free Download: Financial Advisor’s HR Toolkit   Compensation Plan Design – The B.B.P. Formula Historically, advisory firms have paid their administrative/operations staff hourly or a salary. Team members responsible for client service or business development were paid a percentage of the gross revenue. While this legacy compensation model remains prominent in the industry, its usage is declining and being replaced by a more scalable compensation model that provides greater security to younger advisors joining the team, fosters greater enterprise value, and promotes teaming. The first step in getting away from a legacy compensation model and creating something that will help foster teaming, is more narrowly defining job roles and tailoring the compensation to incent the needed behaviors/outcomes for such roles. Most firms have struggled to find/recruit advisors to join their team that can find clients and service them. This is largely because providing excellent client service and doing business development require unique skill sets. Those that possess both skills are generally good at both, but not great at either. But with time and latitude, they will generally gravitate towards and excel in one area. Those who are mediocre at both service/operations and prospecting will have a place in early-stage growing teams, but the firm often outgrows these generalists as the firm achieves scale. And on the occasion the firm finds someone who is great at both – these team members that often make poor employees long-term, as most eventually leave to start their own practices. To begin to narrow the skills and requirements for roles, an effective high-level way to group professional staff for the purposes of compensation plan design is identifying the “Farmers” and the “Hunters” on the team. Most growing firms will have their professionals in a hybrid capacity, but again, most of these professionals are only truly great at one of these two areas. The goal is to narrow the work for each professional to the thing they are best at in an effort to maximize their potential and drive efficiency/effectiveness.   Farmers Farmers are the service professionals on the team, taking care of clients, managing the investments, handling operations, etc. Their primary function is to ensure the firm retains clients. Farmers will have a base salary comprising roughly 80-90% of their total compensation. Farmers who service clients are often paid a salary that adjusts annually based on the number of clients and/or assets under management. As the amount of clients/AUM increases, through the assignment of more clients to service, referrals from existing clients, additions to accounts, or appreciation of the assets, the salary will be adjusted according to a predetermined schedule that is calibrated for the location and qualifications of the individual. They will often be eligible for bonuses based on new assets from existing clients or new referrals from existing clients. The final component is the “profit” element – which is designed to get them focused on the overall health and performance of the company. There are a variety of ways to structure this, but most farmers are eligible for a profit-sharing plan that pays a bonus at the end of the year based on firm

Creating a Winning Compensation Plan (Ep. 10)

Success Through Succession Series

This four-part series provides a deep dive into why advisors should engage in succession planning proactively, when to start, the most effective strategies being used today, and much more. Part 1: Preparing Your Practice, Preparing Your Team Part 2: The Mechanics of Succession Planning Part 3: How to Effectively Share Equity Part 4: How to Make Succession More About Growing, Than Going Learn more about what we cover in each part in the descriptions below. Part 1: Preparing Your Practice, Preparing Your Team When operating an advisory business, it is essential to start with the end in mind. What do you want to build? How big do you want to get? When does the Gen 1 founder(s) want to be able to retire? And, when you leave the business, who takes over (and how do they afford it)? These are the questions the industry’s most successful advisors have an answer for and which we’ll unpack. This first session focuses on what advisors need to do with their internal operations and service model to position themselves for a successful exit. We will talk about who you would share equity with and when, how valuation should be approached, career track best practices, how to get Gen 2 and Gen 3 team members ready, and critical financial considerations that impact succession (compensation and profitability). Part 2: The Mechanics of Succession Planning Selling the business is one of the most important decisions you’ll make as a founder. For some, they’ll hit the “easy button” and sell the entire business to a peer and then retire after a short transition period; others will simply retire through attrition, dying at their desk. Internal succession with your team is that happy middle ground. In this second session, we’ll dive deep into the taxation of internal deals, stock vs. asset sales, seller vs. bank financing, gifting and grants, how to handle sweat equity, minority discounts, and family business transfer considerations. Part 3: How to Effectively Share Equity Selling your business, regardless of how long it takes or who you sell to, is something you get one shot at doing right and is the final step to ensuring your clients are taken care of when you finally exit. This third installment goes deep on the four most common and effective internal equity-sharing alternatives being used today. We will look at how buy-ins can be structured, evaluate the pros and cons of each, and explore real-life case studies to understand how they ultimately chose the right solution for their situation. Part 4: How to Make Succession More About Growing, Than Going This final installment focuses on the human element of the transition. We will focus on how to effectively map out the role transition between Gen 1 and Gen 2 (and/or Gen 3), how and when to communicate the plan to staff and clients, and what the seller’s ongoing role could look like. We will also review how to get Gen 2 and Gen 3 ready to take over, and best practices to position your successors to not just operate the business, but how they can grow it even after you’re retired.

Future Proof 2024

Watch: Mid-Year M&A Update Ready to Grow? How to Share Equity:Register for This Webinar → Preparing to Acquire:Practice Acquisition Checklist → Planning for Succession:Succession Readiness Guide → Exploring Value Drivers:Guide to Increase the Value of Your Business → Grab A Valuation We offer a variety of solutions and turnaround times to fit your needs. Join myCompass Our membership club grants you inside tips and opportunities to grow. Review our Seller Services We’re here to ensure you secure the best buyer, price and terms.

Advisor M&A Highlight – 2023 Mid-Year Update

Whether you are contemplating buying or selling an advisory business, or simply wanting to stay current on industry developments, this Mid-Year Advisor M&A infographic contains our most interesting findings in the financial services industry. From January to June of 2023, here are the immediate trends you don’t want to miss: Valuation multiples continue to rise despite the rate environment. Practice multiples continue to see greater diversity as the M&A market evolves, with sellers preparing their practice further in advance. Down payment percentages continue to increase even in the midst of a possible economic recession. Average recurring multiples stay strong across the United States. Succession planning is starting earlier but not early enough. To learn more about our discoveries and data in detail (including what to expect in the second half of 2023 and beyond), fill out the form to download the infographic! DOWNLOAD NOW

4 Reasons to Formalize Your Business Entity as a Corporation or LLC

Introduction The decision to form an entity structure for your financial practice is a critical step for experienced independent financial advisors. Many advisors address this topic after a specific need for it has arisen, but addressing it proactively allows you to establish the right structure with less stress and take advantage of numerous other benefits along the way. This article highlights the signs indicating when it’s time to establish an entity and the risks associated with not doing so. Business Growth and Liability Protection As an advisor, you likely have errors & omissions insurance to protect your business. But, that only covers you as an advisor, not as a business owner. As your practice grows, you will hire/fire more frequently, your business will become increasingly complex, and thus it becomes imperative to establish an entity structure (e.g., a limited liability company (LLC) or a corporation). This is even more true if you are operating or setting up your own independent Registered Investment Advisor. By doing so, you separate your personal assets from business liabilities, providing a layer of protection against potential legal claims and financial risks. If you fail to establish or maintain an entity structure, your personal assets are vulnerable, putting your hard-earned wealth at stake. Professional Credibility and Permanence Forming an entity lends professionalism and permanence to your financial practice. It demonstrates to clients, colleagues, and potential partners that you are committed to a long-term business venture and take your profession seriously. Without a formal entity structure, your practice may be perceived as a lifestyle practice or temporary endeavor, raising doubts about its stability and sustainability. Tax Efficiency and Flexibility Establishing an entity structure allows you to optimize your tax situation and take advantage of potential deductions, credits, and other tax benefits. Different entity structures offer varying tax advantages, so it’s essential to consult with a professional to determine the most suitable structure for your practice. Operating without an entity structure can result in missed tax-saving opportunities, potentially leading to higher tax liabilities and reduced profitability. It is important to consider your short and long-term growth plans as part of this consideration, as some structures may make your ability to merge/purchase/tuck-in other practices more or less difficult.  Extended reading: First DOL, Now IRS Gunning for Advisors Succession Planning and Business Continuity Planning for the future is crucial for any financial advisor, including establishing a workable succession plan and ensuring business continuity. An entity structure enables you to more easily transfer ownership, sell the practice, or pass it on to a successor, maintaining continuity for clients and preserving the value you’ve built. Operating without an entity structure can complicate or hinder the succession process, potentially leading to disruptions and client attrition. For experienced independent financial advisors, the decision to form an entity structure for their practice should not be overlooked or dealt with as a quick “check the box” issue. Establishing the appropriate entity structure will ensure your business is futureproofed and avoid having to rework your entity later. It also provides crucial benefits such as liability protection, enhanced credibility, tax efficiency, and a solid foundation for succession planning. Failing to form an entity structure exposes personal assets to risk, limits professional credibility, and may result in missed tax benefits and future succession challenges. Whether you are a Registered Investment Advisor, a dually registered advisor under a broker dealer, or a hybrid, SRG’s team of entity experts has worked with financial advisors nationwide to evaluate the options and provide recommendations designed to support their business while navigating the nuances of the financial services industry. Learn more about SRG’s Business Entity Services for Financial Advisors