The Importance of Succession Planning for Advisors (Ep. 5)
Fundamentals of Exit Planning
Join SRG’s Executive Vice President, Kristen Grau, CVA, CPA, CEPA as she shares the fundamentals of exit planning as well as her industry expertise in assisting sellers in finding the right buyer. Topics include: An update on 2023 valuation trends and the M&A market How to maximize the value of your practice today in preparation for your eventual exit Ensuring the best price, terms, and fit when you’re ready to sell Fill out the form to watch now! Watch Recording Resources [E-Book]5 Post-Transition Roles for Sellers → [E-Book] How to Tell Your Employees You’re Selling → [Article]6 Major Cost Considerations to Sell Your Business → [Article]What to Expect When You Sell Your Business → Learn more about SRG’s Exit Services. Schedule your free consultation below! Presenters Kristen Grau, CPA, CVA, CEPA Executive Vice President
SRG Off Script: RIA Tax Considerations with Succession and Selling
As an advisor, you know that selling/buying a business is a major step for any founder/owner. Between the valuation, timeline, cash flow analysis, deal structure, and contracts, it’s enough to make your head spin. But, one of the most overlooked parts of M&A and succession planning is the tax strategy and how to leverage it to your advantage. Date: Thursday, April 13th, 2023 Time: 11 a.m. PST / 1 p.m. CST In this SRG Off Script, we will answer your questions on the various tax considerations when selling a business or sharing equity. If you’ve ever wondered how to maximize the tax result in a sale/merger, how to get long-term capital gains, the nuances of family succession planning and taxes, or even just the right entity structure to minimize taxes, this is the session for you. Submit your question(s) at registration or live during the webinar! SRG Off Script is a monthly webinar series hosted by President David Grau Jr. David along with other industry experts provide insight and address questions related to all stages of managing a financial practice. Have a request for future SRG Off Script session topics? Let us know at registration or email marketing@successionresourcegroup.com Watch Recording Resources Download Presentation Deck → [White Paper]Sunset vs. Succession: Realizing the Value of a Career in Financial Advice [Blog Post]What is Phantom Equity and How is it Used? → [SRG Services]Succession Planning →Seller Advocacy →SecondLook™ →Deal Support → Learn more about SRG’s Selling & Succession services. Schedule your free consultation below! Presenters David Grau Jr., MBA President/Founder
SRG Off Script: Succession & Equity Sharing Q&A
https://youtu.be/L87GvTcmIeg In the latest monthly webinar series titled SRG Off Script, David Grau Jr. answers your questions surrounding succession planning best practices, equity-sharing strategies, and other ways to attract and retain top talent. Submit your question(s) at registration or live during the webinar! SRG Off Script is a monthly webinar series hosted by SRG President David Grau Jr. David along with other industry experts provide insight and address questions related to all stages of managing a financial practice. Have a request for future SRG Off Script session topics? Let us know at registration or email marketing@successionresourcegroup.com Learn more about SRG’s services: Succession Planning & Equity Sharing. Schedule your free consultation today! Presenters David Grau Jr., MBA President/Founder
The Challenges in Succession Planning and How to Avoid Them
Introduction Outlining strategic objectives and planning for the company’s future with a solid succession plan are both tasks that every business owner should undertake at some point. However, simply doing it doesn’t guarantee a successful transition plan; succession planning poses many challenges and potential pitfalls of which financial advisors need to be aware. Pitfall #1: Key Positions Need to be Redefined as the Company Changes This is a common mistake when business owners do succession planning early in the company’s history and never revisit it. Professional development happens, so team members designated as business leaders today may be on a different career path tomorrow. It’s important to revisit your succession plan regularly and make changes as the company evolves. Make a list of potential successors if you’re a larger organization. Monitor employee performance and shorten the list as time goes by, but it’s not necessary to find the “right person” early in the process. Look for employees that achieve success in smaller projects and gradually add them to your leadership team when you deem them worthy. Potential Pitfall #2: Procrastinating About the Succession Planning Process Effective succession planning begins with making the decision to move forward with it. Every business owner knows that they “should” do it as soon as possible, but it’s easy to procrastinate and put off the future needs of the company when you’re occupied with critical decision-making during the business day. Succession plans seem like a task for “later,” when in fact they should be worked out before the company opens its doors. Put it under “development plans” and get it done asap. Potential Pitfall #3: Choosing Someone “Just Like You” to Take Over When evaluating internal candidates for succession, most business owners tend to look for someone exactly like themselves, a “clone” that will somehow duplicate your success with the next generation of the company. Looking at your top talent or potential buyers this way is a mistake. You might just miss something in the other candidates while you’re looking for that perfect fit. The next mistake smaller firm owners make is to think too small. The succession plan is limited to their network of business associates, partners, or competitors and may end up selling to friends or lowball suitors because they think their firm is “too niche” or doesn’t have intrinsic value in their market. When it does come time to sell, these firms often sell for much much less than they would if they had an advocate pulling together offers. Potential Pitfall #4: Having a Succession Plan, but not a Succession Strategy Succession planning programs need to incorporate a succession strategy. Many business leaders treat their succession planning like a daily to-do list, adding bits and pieces to it as they come to mind. The result of this is a body of work that is incohesive and doesn’t really outline a clear path for transition or direction for the HR Department. The succession planning processes you incorporate into a plan should be clear to members of your leadership team and the HR professionals who will need to promote or terminate employees during a transition process. The plan should also outline your business goals, keeping everyone on the same page to avoid potential disruption. Potential Pitfall #5: Bypassing the Valuation Process Valuation is one of the succession planning challenges that is often overlooked or outright ignored because it’s a common practice to use hypothetical values. That might be okay for smaller organizations, but any company with a leadership team and high potential employees needs to have a clear idea of what their true value is. Few organizations truly understand this. A common business case where this becomes relevant is when a member of the leadership team is talking about succession and the subject of a buyout comes up. How can you discuss this if you have no idea what the company is worth? Even if the acquisition wasn’t part of the company’s future plans, you’ll still want to discuss it. Valuations should be done regularly. Potential Pitfall #6: Failing to Update the Succession Plan Treat your succession plan as a living document and update it frequently as the company grows and changes. What’s good for today’s business situation may not be the right fit for tomorrow. It’s called a succession planning process because you’re never completely done with it, at least while you’re still in business. The end comes when you make your exit. Most companies do regular performance reviews for their employees. Treat your succession planning the same way. Schedule specific times of the year to go over the plan and make changes when necessary. Some firms will do this quarterly if their growth rate is high or they have an acquisition or merger strategy in place. This should not be ignored. Potential Pitfall #7: Relying on Past Performance What have you done for me lately? As a company adds more employees, the big picture changes. The same thing happens when current employees learn new skills. It should be possible for those who work for you to achieve success and be considered for future leadership positions. Successful companies set this up as an open process for all. Often at the same time, newer employees are making a name for themselves, established employees could be slacking off, living on past achievements. It’s important to have a performance management process where you evaluate the “go-getters” and identify those who are slowing the company down. This information should be considered when you update your succession plan. Potential Pitfall #8: Focusing Only on Executive Level Positions The succession planning process shouldn’t be limited to executive positions only. When a firm grows, there should be an established hierarchy that shows employees what they can aspire to. This motivates them to try harder because there’s an obvious reward available when they’re successful, namely a promotion and a pay raise. For solo practitioners, you only need to worry about replacing yourself and distributing your assets if something unfortunate happens
7 Steps to Successful Succession Planning
The exact details of a succession planning process are determined by the size of the firm and the urgency with which successors need to be chosen. With an aging workforce, the need for speed is greater. It is less pressing when key positions are filled by younger executives.
Succession Planning and Management Process
While financial advisors get paid for helping their clients make sound financial decisions and plan for retirement, they themselves are also faced with these same challenges in regards to their own practices. Premature death or accident are an unpopular topics under any circumstances, but nevertheless, they are subjects that need to be addressed so that loved ones and business interests are taken care of after death.
Powerful Succession Planning Tools You Need
The creation of a succession plan for your business should not be considered an optional exercise. It’s a task that owners and executives must complete for the sake of their employees and shareholders. Think of it in terms of establishing a legacy for yourself.
Selling a Book of Business- Tips for Financial Advisors Planning an Exit
Thinking of Selling a Financial Planning Practice? If selling a financial planning practice is new to you… you’re not alone.Mergers and acquisitions in the wealth management space are expected to surge over the next 5–10 years—and for good reason. Over half of active financial advisors are over age 50, and many lack a formal succession plan. As retirements increase and deal volume continues to rise, consolidation is inevitable. (Curious about what’s driving M&A? Grab our 2025 Highlights Report) Other pressures—like rising taxes and interest rates, tighter regulations (think Reg BI), tech demands, and fee compression—are adding stress and shrinking margins. For many advisors, this creates a tipping point, prompting them to explore exit options or sell their book of business. In short: sellers will be plentiful, and timing will matter. Selling a Financial Planning Practice: The Process Selling your financial planning practice is more than just finding a buyer. It’s a strategic process that requires careful planning—from knowing what your book of business is worth to negotiating deal terms and navigating tax implications. To help you prepare, we’ve outlined key questions to ask, steps to follow, and what to expect even after the deal closes. Because selling your business isn’t the end—it’s the beginning of a thoughtful transition for your clients, too. When is the Right Time to Sell Your Book of Business? Timing is everything when it comes to selling your book of business—but the right time isn’t always obvious. Personal circumstances are rarely in proper alignment with market conditions. Simply “wanting out” does not necessarily mean that it is time to sell your book of business. If your revenue is declining, you just lost your largest client, or made any major internal changes, you may not get the value you are hoping for or expecting from the financial advisory practice you’ve built. Retirement is an easier scenario for many advisors. If you set a target date a few years into the future, you can take the necessary steps to ensure you have maximized the value of your financial practice and positioned yourself to attract the best suitors. Preparing Your Book of Business for Retirement Don’t let your client demographic lower your valuation—start planning for generational continuity now. Another priority for those last few years may be prospecting and on-boarding younger clients if you want to create an internal transition plan. Advisors who have worked in the industry long enough to be considering retirement generally have aging clients, specifically clients over the age of 70. While buyers expect an older clientele when buying a business from a retiring advisor, the specific age of clients and the concentration of assets with those older clients can have a detrimental impact if no multi-generational planning is happening. The key is to understand your book of business and the demographic early enough that you can do something about it. Beginning to do more generational planning with clients will not be an overnight success, but with time and focused effort, advisors have the ability to mitigate one of the primary concerns any buyer will have. It is also a good idea to find the technology you need to be able to track and show the age of your clients, which are engaged in multi-generational planning, what assets those clients have, and any potential roll-overs or new money that could come into the practice. What is Your Book of Business Worth? Before you name your price, here’s how buyers are actually sizing up your business. The two most common valuation methods for financial service businesses is either a market-based valuation using comparable transaction data, or an income-based valuation that focuses on the business’s ability to generate profits. Neither of these are the correct solution 100% of the time; determining which method is most appropriate is dependent on the circumstances and size of the parties involved. The valuation of a financial advisor book of business can be estimated using a revenue multiplier of trailing twelve-month revenue. The industry standard for RIAs or advisors with recurring revenue is generally between 1.6 and 4.4, but when buyers outnumber sellers by a factor of 75:1 in 2020, it is common to see a well-positioned practice that has been prepped for sale, to exceed 3.0x on their recurring revenue. (Curious about what’s driving M&A? Grab our 2025 Highlights Report) Another method used for estimating value is an earnings multiplier (e.g., multiple of EBITDA, EBOC, EBIT, SDE, etc.). Serious buyers will want to conduct an actual valuation as well as take a deep dive into operational costs and profit margins. Even solo advisors have expenses, but the question remains, will you be assuming those expenses? If you will be assuming the seller’s overhead, and it is more reasonable to use a valuation method that focuses on profitability versus a value of the top-line revenue. When using this method, the industry standard for valuation is 4 to 8 times the annual earnings, including reasonable owner’s compensation. Regardless of the method used to determine business valuation, buyers will also factor in future cash flow projections, client retention rates, current fee structure, and the estimated valuation of closest competitors. Solid numbers in each of these areas could increase the sale price. How Can Advisors Maximize the Value of a Book of Business? Multipliers do not tell the entire story. Granted, revenue and profits are the most relevant variables in calculating the value of a book of business, but there are other actions the financial advisor can take to boost (or diminish) the asking price. A few of the key performance indicators that advisors have the ability to influence and should therefore monitor are as follows: Revenue mix – The most valuable revenue sources are those that are consistent and recurring, such as fees, trails, 12-b1s, renewals, and financial planning. While a simple fee-only RIA is certainly attractive and simple for a buyer to acquire, more diversified revenue sources often result in higher overall values paid. The most valuable of the recurring income sources
Sunset vs. Succession: Realizing the Value of a Career in Financial Advice
Plan Your Exit with Full Information In recent years, expanded access to capital and advances in advisor technology have allowed independent practices to become increasingly transferable. This gives selling advisors more options in exiting the business and transitioning their practice to a successor. To help you plan for your exit, this white paper provides a close look at the benefits of independence followed by a sale of the business to a successor, as opposed to a traditional corporate sunset plan. Fill out the form to download the report. DOWNLOAD NOW