Why Every Financial Advisor Needs Annual Entity Maintenance

Authors Annual entity maintenance is the difference between a business structure that protects you and one that quietly exposes you to personal liability, IRS scrutiny, and deal-killing complications. Most financial advisors set up an LLC or S-Corp when they launch their practice, file the paperwork, and never look at it again. That gap between formation and ongoing upkeep is where the real risk lives. If you own an RIA or operate under a broker-dealer with your own entity, the structure you created on day one does not stay current on its own. State filing requirements change. Ownership shifts happen. Revenue flow documentation falls out of date. Operating agreements stop reflecting how the business actually runs. And when it comes time to bring on a partner, sell your practice, or defend your setup in an audit, a neglected entity can cost you far more than it would have cost to maintain. This article walks through what annual entity maintenance involves for financial advisors, why the industry has unique requirements that generic small-business guidance does not cover, and what a practical maintenance routine looks like. What Is Annual Entity Maintenance for Financial Advisors? Annual entity maintenance is the process of reviewing and updating the legal, financial, and operational components of your business entity on a recurring basis. For most small businesses, this means filing an annual report with the state and keeping licenses current. For financial advisors, it means considerably more. Financial advisory firms operate under regulatory constraints that most businesses do not face. If you hold securities licenses under FINRA Rule 2040, your broker-dealer pays you personally regardless of whether you have a business entity. If you elected S-Corp tax status, the IRS requires you to pay yourself a reasonable W-2 salary and maintain specific documentation around how revenue moves from your personal accounts into the entity. If you have business partners, your operating agreement needs to reflect current ownership percentages, voting rights, and buy-sell terms. Annual entity maintenance addresses all of these layers: state compliance, IRS documentation, governance updates, financial reconciliation, and strategic readiness. It is the ongoing work that keeps your entity doing what you set it up to do. Why Do So Many Advisory Firms Skip Entity Maintenance? The most common reason is that nobody told them it was necessary. Many advisors form an entity with help from a local attorney or online filing service, receive their articles of organization, open a business bank account, and assume the work is done. The entity exists on paper, so it must be working. This is especially common with single-owner firms. When you are the only decision-maker, the formality of annual resolutions, meeting minutes, and ownership ledger updates can feel unnecessary. There is no partner to negotiate with, no equity to divide, and no one asking to see your governance documents. The problem is that neglected entities accumulate risk quietly. A missed annual report filing can result in administrative dissolution. Outdated governance documents can block a transaction months or years later. Revenue flow arrangements that were set up correctly at formation can fall out of compliance if business circumstances change and the documentation does not keep pace. In SRG’s experience working with hundreds of advisory firms nationwide, the majority of advisors who come to us with an existing entity have significant gaps in their documentation and compliance. For some, they filed with the state, received their articles, opened a bank account, and moved on. For others, a local attorney filed the entity and provided simple governance documents. In either case, the critical steps remain incomplete. What Happens When Your Entity Falls Out of Compliance? The consequences of neglected entity maintenance vary in severity, but they tend to surface at the worst possible time: when you are trying to complete a transaction, defend yourself in an audit, or navigate a partnership dispute. Personal Liability Exposure One of the primary reasons advisors form an entity is to separate personal assets from business liabilities. That separation depends on what attorneys call “maintaining the corporate veil.” If you commingle personal and business finances, fail to keep proper records, or let your entity lapse with the state, a court can “pierce the veil” and hold you personally liable for business obligations. This means your personal assets, including your home, savings, and investment accounts, could be at risk. Nicole Frey, CFP®, SRG’s entity support lead, emphasizes this point with clients: the entity creates a wall between your personal and professional life, but that wall requires maintenance. If you are not keeping company and personal affairs separate, including using distinct bank accounts for personal income, entity operations, and profit distributions, you may be undermining the very protection you set the entity up to provide. IRS Audit Risk and Revenue Flow Issues Financial advisors face a unique IRS challenge that most business owners never encounter. Because broker-dealers and corporate RIAs pay licensed professionals directly under FINRA Rule 2040, advisors must move that income from their personal tax return to the entity’s tax return. The IRS has historically challenged this arrangement under what is known as the “fruit and tree doctrine,” which holds that taxes must be paid by the person or entity that controls the source of the income. The 2016 Tax Court case Fleischer v. Commissioner illustrates the risk. A Nebraska-based financial advisor working under an independent broker-dealer set up an S-Corporation and assigned his payments to it. The IRS challenged the arrangement, and the Tax Court agreed, resulting in over $40,000 in taxes, penalties, and interest. The court outlined specific deficiencies in Fleischer’s setup, all of which could have been addressed with proper documentation and ongoing compliance. To satisfy the IRS that your entity is the legitimate source of income, three factors need to be in place and documented: control over the revenue (demonstrating that no single owner has sole control over how income is handled), a contractual obligation to move revenue from your personal account to the entity, and a reasonable W-2 salary if an

Advisor Compensation Plans: The B.B.P. Model for RIAs

Authors “Firms rely on an outdated playbook.” Most advisory firms still pay advisors on decades-old revenue-based models designed for solo producers, not the integrated teams they are building today. That mismatch is compressing margins, stalling succession plans, and destroying enterprise value. A modern framework built around base salary, targeted bonuses, and profit participation aligns incentives with the business you are trying to build. Why Is Advisor Compensation Broken at So Many Firms? Growing teams, rising M&A activity, and continued industry consolidation are reshaping independent wealth management. Scale, next-generation advisors, growth, and enterprise value are now the industry’s central conversation. As professional service businesses, client-facing advisors are central to delivering on those objectives, making advisor compensation more important than ever. Firms are trying to balance profitable growth and increasing enterprise value with the need to retain and attract talent through competitive compensation. Over- or under-compensating advisors, or misaligning incentives, can have long-term consequences that quietly undermine margins, culture, and value. The core problem is straightforward: teams, roles, and growth strategies have evolved faster than the compensation models behind them. Drawing on more than 2,000 firm valuations, with compensation data covering tens of thousands of professionals, SRG compensation specialists are seeing more advisors form and grow true teams. Not just loose groups sharing back-office costs, but integrated firms with unified service models, investment strategies, and operations. At the same time, this research shows that most firms are still compensating advisors using models that have remained largely unchanged for decades. In roughly 95% of the teams that SRG works with, the stated goal is to create collaboration and work as a team within an ensemble structure. Yet the compensation model still rewards individual production. That gap between what firms say they want (efficiency, growth, and continuity) and how they pay advisors continues to widen. The result is margin compression, confused career paths, frustrated owners, and suppressed enterprise value. How Does the Traditional Revenue-Based Model Work? The most common approach, across independent RIAs and dually registered teams alike, is to pay advisors a “salary” that is calculated as a direct percentage of the revenue or AUM they service. Advisors are typically paid anywhere from 30% to 90% of revenue, depending on the support received, and are responsible for sourcing and servicing their own clients. This model works well for its original purpose: rewarding advisors focused on building and servicing their own books of business. These are the “hunters.” If they grow, they earn more. If they don’t, compensation adjusts accordingly. It is a clean model: recruit producers, provide infrastructure, and share in the upside. Advisors who thrive here value autonomy and unlimited upside in exchange for risk. The revenue-based model originated decades ago in wirehouses and banks, where advisors received a 30% to 40% payout and the house provided the office, desk, and clients. When advisors went independent, the structure came with them, only the payout jumped to 80% or 90%. The mechanics stayed the same: pay for production. That structure still has a place. But it was designed for a world of solo practitioners building individual books, not for the ensemble firms dominating the industry today. What Happens When You Pay Farmers Like Hunters? Where the traditional model breaks down is in growing firms that are no longer hiring hunters but instead are recruiting and training younger professionals to service assigned client households. These are the “farmers.” They are hired to create capacity, deliver a standardized service model, and support firm-level growth, not to source business independently. Paying farmers the same way hunters are paid creates increasing tension for firm owners, as compensation grows rapidly over time without a corresponding increase in workload or responsibility. Consider a simple example. An advisor is hired at $250,000 plus modest bonuses to service 100 households representing $100 million in AUM. Seven years later, that advisor is still servicing those same 100 households. Market appreciation has doubled the assets and fees, but not the scope of work. The advisor’s compensation is now $500,000 for effectively the same role.The math gets worse at scale. If an advisor is assigned 100 households, each with $1 million in investable assets at a fee of 100 basis points, they are managing $100 million in AUM, or $1 million in annual fees, with a salary of 50%, or $500,000 annually. Ten years later, the markets have done reasonably well, and the advisor has not lost any clients. The firm is now paying that advisor $1 million annually to do effectively the same job and take care of the same 100 households. For most RIAs, this is simply unsustainable. Margin Compression and Owner Pay Inversion You cannot build a scalable ensemble using a compensation system designed to reward individual autonomy and production. Revenue-based payouts become the equivalent of a cost of goods sold on the P&L, taking dollars right off the top before the firm even starts the day. What makes this especially painful is that in many cases, the top advisors end up making more than the business owner. The owner may earn the highest total, but they always get paid last, after all operating expenses. Convincing an advisor who takes a percentage off the top line to buy in and trade that for a percentage of the bottom line is one of the hardest conversations in succession planning. Good luck convincing your highest-paid team member to reduce their guaranteed percentage so they can become an owner and take on more risk. That is the trap revenue-based compensation creates for internal succession plans. What Is the Base, Bonus, Profit (B.B.P.) Compensation Model? B.B.P. stands for Base, Bonus, and Profit. It is SRG’s proprietary compensation framework, derived from the largest and most successful advisory firms in the industry and tested and proven to help attract and retain talent more successfully and efficiently than the traditional production-based model. The model incentivizes the right behaviors while maintaining a team focus. The framework has three components, each calibrated differently depending on whether the advisor’s primary

Merger or Sale? Finding the Right Path for Your Exit

Authors “It depends on your objectives.” The right exit path for your advisory firm depends on your objectives, not your firm’s size. A merger and a sale serve fundamentally different goals, and choosing the wrong one can cost you years, money, and the legacy you spent decades building. This article walks through both paths and provides a framework to help you decide which one fits your situation. “Should I merge or sell my firm?” Key Differences Between a Merger and a Sale (Source: SRG Webinar, August 2026) These terms are often used loosely throughout the financial services industry, creating confusion that can complicate exit planning. Understanding the distinction between a merger and a sale is an important first step in determining which path best aligns with your objectives. A merger is a combination of two or more businesses into a single entity with shared ownership and shared control, if intended by the parties. Two firms become one new operating unit. Revenue, expenses, and profits are pooled. Both parties typically stay involved in the business going forward, often for years. Mergers tend to combine operations, reduce duplicative costs, and create growth opportunities that neither firm could achieve alone. A sale is a transfer of ownership from one party to another. The buyer acquires the business, and the seller exits daily operations. A sale prioritizes immediate liquidity and a clean reduction in risk. Once the deal closes, the seller’s ongoing involvement is typically limited to a defined transition period. “A merger isn’t just a smaller sale, and a sale isn’t automatically the better move. The right path depends on what you want your role, your clients, your team, and your legacy to look like once the transaction is done.” Kristen Grau, CPA, CVA, CEPA Why Your Exit Path Shapes Everything That Follows Why This Decision Matters: Seven Areas Your Exit Path Shapes (Source: SRG Webinar, August 2026) The decision between a merger and a sale affects nearly every aspect of your transition, including value, control, timing, client experience, staff retention, tax planning, and post-close obligations. Each of these considerations plays out differently depending on the path you choose. Value. A merger and a sale get valued differently and, more importantly, get paid out differently. In a sale, the purchase price is typically a defined sum paid through some combination of cash at close, a promissory note, and earn-out payments. In a merger, the “price” is usually expressed as an equity stake in the combined entity, which appreciates over time rather than arriving as a lump sum. Control. In a sale, control generally transfers to the buyer. In a merger, control depends on the ownership percentages, voting rights, management roles, and approval requirements negotiated by the parties. Depending on the structure, you may retain significant influence, share control equally, or hold a minority voice in the combined business. Timeline. Some exits wrap up in months with a defined end date. Others keep you involved for 5 to 15 years. The path you choose determines which end of that spectrum you land on. Client transition. How your clients experience the change depends heavily on the structure. A merger can position the transition as a growth story. A sale requires a more deliberate communication strategy to ensure clients feel secure with a new owner. Staff retention. Your team watches closely during a transition. In a sale, staff may face uncertainty about their roles under new ownership. In a merger, the combined entity may create new opportunities, but it can also create redundancies that need to be resolved. Tax planning. The two paths create different tax outcomes. In a sale, the deal structure determines how proceeds are taxed. In a merger, equity contributions can often be structured as tax-deferred events, though the specifics require careful planning. Post-close obligations. A sale typically involves a defined transition period with clear boundaries. A merger means ongoing obligations as a co-owner, including governance, decision-making, and shared accountability for results. “Your exit path isn’t a decision you make once and forget. It shapes years of your life afterwards.” Kristen Grau, CPA, CVA, CEPA The Sale Path: What to Expect The Sale Roadmap: Five Steps from Preparation to Close (Source: SRG Webinar, August 2026) Most advisors think they understand what selling looks like. But the firms that get the best outcomes follow a structured process that starts well before any buyer enters the picture. Step 1: Get the Firm Ready This is the step most advisors underinvest in because it does not feel like progress. There is no buyer yet, no offer, nothing exciting happening. But this is where deals are won or lost. Start by clarifying your objectives. What do you want your life to look like in three years? What does a successful outcome look like for your clients and your team? Without clear answers to these questions, you cannot evaluate any offer against your actual goals. Then get your financials in order. Organize historical and current financial data from sources a buyer can verify. “Sloppy books don’t just slow due diligence, they cost you money. Uncertainty and a lack of organization gets priced as risk.” Kristen Grau, CPA, CVA, CEPA Third, get a formal valuation. A certified valuation report helps you understand your value, what is driving it, and what is putting it at risk. Do this well before sitting across from a buyer who already knows your numbers. Finally, streamline your processes. Reduce how much of the business runs through you personally. Document your workflows. “Every process that is tied directly to you, or goes undocumented, is a discount that the buyer will find.” Kristen Grau, CPA, CVA, CEPA Step 2: Find and Screen the Right Buyer Finding a buyer is not a sourcing problem. It is a screening problem. Advisors receive unsolicited acquisition letters regularly. The work is figuring out which buyers are actually right for you. Screen every buyer against consistent criteria: financial strength, how they are funding the transaction, their plan for your clients

Sloppy books, dirty data can undermine RIA sales or mergers

By: Tobias SalingerPublishing Date: August 20, 2026 Before embarking on a succession plan through a merger or sale, registered investment advisory firm owners need to take a careful look at their company’s data. Leaner, comparable figures will aid owners who choose either type of deal, according to a webinar held earlier this month by consulting firm Succession Resource Group. Kristen Grau, the head of the firm’s seller advocacy listing program, and Nicole Frey, its director of team solutions, explained how the quality of a firm’s data affects its formal valuation. And getting a professional valuation represents an essential step prior to pursuing any sales, Grau said, and one that Frey said she highly recommends for owners ahead of a merger, as well. Unfortunately, data preparation “is the step that most advisors underinvest in, because it doesn’t feel like progress,” Grau said. Reliable data, she said, can help prospective sellers by accomplishing four important goals: Ensuring that due diligence and valuations come from standard metrics Rooting out personal expenses and other costs that don’t relate to operations Placing owner compensation at market levels Verifying that assets and liabilities stem from the actual business To read the full article, please visit: https://www.financial-planning.com/news/sloppy-books-dirty-data-can-undermine-ria-sales-or-mergers Disclaimer This article was first published by Tobias Salinger.The original article can be found here. All rights to the original content are held by FinancialPlanning.com.

How to Use Equity Compensation to Boost RIA Valuation and More

By: Tobias SalingerPublishing Date: June 1, 2026 Deciding to pay a current or future partner in equity is only the first step in a complex process for registered investment advisory firm owners. But stock compensation can help firms attract and retain financial advisor talent, create a succession plan and boost their valuation, according to a webinar held last month by consulting firm Succession Resource Group and led by Julia Sexton, the firm’s director of strategic organizational planning, and Nicole Frey, its director of team solutions. A successful equity pay plan requires choosing the right structure for the firm’s goals and the correct corporate entity for tax and compliance. Advisors should start by figuring out the end goal with the compensation, Sexton said. This helps clarify complex decisions, such as whether to pay with phantom equity (which provides appreciation or liquidation rights without technical ownership) and how possible voting rights may affect the firm’s governance, taxes or possible future M&A deals. Disclaimer This article was first published by Tobias Salinger.The original article can be found here. All rights to the original content are held by FinancialPlanning.com.

How RIA Valuations Work: What Drives Your Number

Author “Is my practice worth 15x?” If you have spent any time around other advisors lately, you have probably heard some version of this. Someone sold for 15 times EBITDA. Maybe it came up at a conference, maybe a peer mentioned it over dinner, maybe it showed up in a headline about a big platform acquisition. Here is the part worth sitting with: that number is probably real. Somebody likely did sell for that. What tends to get lost is what the number was actually describing.  Try asking it a different way. Is your practice worth 15x to your partner in a buy-in, or to the next advisor who might take it over one day? Almost certainly not, and that has nothing to do with how good the practice is. The cash flow simply will not support a price like that. No lender is going to underwrite it at that level, and no successor could service that kind of debt without the deal collapsing under its own weight. Now, ask it again about a well-capitalized acquirer who can fold your firm into a much larger platform, layer in synergies you could never generate alone, and pay a meaningful part of the price in equity rather than cash. Suddenly 15x is not just possible. It might be exactly right. Same practice, two very different buyers, two very different numbers, and neither one of them is wrong.  That is really the question underneath the question. Before anyone can tell you what your practice is worth, you both need to agree on who is asking and why. A number built for an internal succession plan and a number built for a strategic sale were never meant to be the same number, and holding one up next to the other is a bit like comparing what a house would rent for against what it would sell for. Both are real. They are just not the same measurement.  This is where a closer look at the data helps, not because it hands you a single magic multiple, but because it shows you the range and what actually lives inside it. SRG’s 2026 Advisor M&A Review looked at 171 peer-to-peer transactions completed in 2025, representing roughly $14 billion in transferred AUM. Here is how EBITDA multiples broke down across that data:  Statistic  EBITDA Multiple  Maximum  13.75x  Third quartile  12.71x  Median  11.65x  Average  9.98x  First quartile  6.41x  Minimum  5.90x  Standard deviation  3.03x  The high end of that range topped out at 13.75x, with an average of 9.98x, up from 9.2x the year before. Recurring revenue multiples averaged 3.27x, up from 3.08x. Worth flagging: this data set is built entirely from peer-to-peer transactions, and we intentionally leave private equity and aggregator deals out of it. Those transactions are measuring something different, what a specific, well-capitalized buyer is willing to pay given its own synergies and growth plans, rather than what a typical buyer would pay in the open market. If you have heard about a deal north of 13x or 14x, there is a good chance that is exactly where it came from.  None of that means the number you heard was wrong. It probably was not. It just was not answering the question you are actually asking, which is usually some version of, what is my practice worth to me, right now, for the purpose I have in mind. That is the question this article is built to help you answer, drawing on what SRG’s valuation team sees across thousands of engagements, working almost exclusively with financial advisory practices.  The multiple is an output, not an input So, to get to your number, and to understand why it might not resemble your neighbor’s at all, it helps to clear up something almost nobody explains plainly: the multiple everyone talks about is not where a valuation begins. It is where one ends.  A gross revenue multiple, an EBITDA multiple, and an EBOC multiple are not, on their own, a finished valuation. The market approach genuinely does start with a multiple, that is the whole premise behind it, but a raw multiple pulled from someone else’s transaction reflects that transaction’s risk profile, not yours. Before it means anything for your practice, it has to be risk-adjusted to reflect the specific characteristics of the practice being valued. The income approach works differently. Rather than starting from a multiple, it discounts a practice’s projected cash flow directly, using a discount rate built around that practice’s own risk, to arrive at value. Either way, the number you hear at a conference is rarely the number that would actually apply to your practice, because it has not been adjusted for the risk that is unique to it.  There are three generally accepted valuation approaches, asset, income, and market, and pricing multiples live only inside the market approach, derived from private transaction data on comparable practices. Taking a hearsay multiple and applying it to your own revenue is not the market approach. It is arithmetic built on someone else’s assumptions, for someone else’s transaction.  Here is a real example of how far that gap can stretch. In a recent engagement, a single market-based value indication implied an EBITDA multiple of 22.56x against the firm’s own reported earnings. That figure looked alarming until we adjusted the earnings side. A buyer acquiring full control would not carry several of the seller’s current costs: one of the older owner’s compensation would not be replaced along with several other roles that would simply be absorbed into the buyer’s existing infrastructure. Adding those costs back roughly tripled the earnings figure, and the very same value, measured against that buyer-adjusted number, implied 8.38x instead. Same practice, same dollar value, same date. Only the earnings side of the ratio changed.  Observation: A multiple only means something once it has been risk-adjusted to your practice. SRG Pro Tip: When you hear a multiple, ask three questions before you react. Multiple of what? Under whose expense structure? How much was cash at close? The question behind the question: who is the buyer? We touched on this earlier with the partner buy-in example, but it deserves a closer look, because almost every disagreement about value traces back to this exact point. It is rarely a disagreement about methodology or market conditions. It is a disagreement about who the assumed buyer is. Different buyers bring different cash flow, different levels of control, and a different ability to make a price actually work, so naturally, they do not land on the

How to Make a Merger a Growth Move: A 5-Step Roadmap for Advisory Firms

Last Updated: August 25, 2026 Author “What comes next?” For many financial advisory firm owners, growth eventually hits a ceiling. Organic client acquisition slows, operational demands pile up, and the question surfaces: what comes next? Mergers have become one of the most effective strategies for advisory firms looking to scale, reduce risk, and build long-term enterprise value. But a merger done poorly can create more problems than it solves. The difference between a merger that accelerates your business and one that stalls it comes down to preparation, process, and the right professional guidance. In a recent SRG webinar, Nicole Frey, CFP®, Director of Team Solutions, and Ryan Grau, CVA, CBA, Director of Valuations, walked through the full merger lifecycle for advisory firms. Below is a summary of the key takeaways. You can also watch the full webinar recording here. Why Advisory Firms Pursue Mergers Advisory firms explore mergers for a range of reasons, and the right motivation depends on where you are in your business lifecycle. Some of the most common drivers include: Faster growth. Rather than relying solely on organic growth, merging with a partner who brings their own book of business can accelerate your trajectory. SRG’s AcquireEdge program helps firms identify and evaluate acquisition and merger opportunities with this goal in mind. Greater scale and efficiency. When two firms combine, revenue may grow at a faster rate as the combined firm expands its client base, referral network, service capacity, and opportunities to capture additional wallet share. Expenses often increase at a slower rate because core infrastructure, technology, compliance, management, and administrative costs can be spread across a larger revenue base, creating margin improvement as the firm scales. Risk reduction and continuity. Sole proprietors face significant key-person risk. Adding a partner means your clients are protected if something happens to you. It also opens the door to better succession planning and contingency planning options. (For more on why contingency planning matters in the context of M&A, see Contingency Planning: A Key to Acquisition Success.) Expanded capabilities. A merger can help you offer new services, diversify your client demographics, enter new geographic markets, or create a one-stop shop by combining with complementary practices like CPA firms. For firms thinking about strategic direction at this level, SRG’s enterprise consulting services can help map the path forward. Talent attraction. In an aging industry, larger combined firms can offer more defined career paths and specialized roles, making it easier to recruit and retain talented professionals. Improved negotiation power. Operating at a larger scale gives you leverage when negotiating vendor contracts, payout grid rates, and fee structures with broker-dealers or custodians. Step 1: Get Your Entity Structure Right Before you start looking for a merger partner, your own house needs to be in order. Your entity structure — the legal form, tax status, and organizational setup of your firm — directly impacts how a merger can be executed. SRG’s entity support services are designed to help firms get this foundation in place. (For a deeper dive, download Your Guide to Proper Entity Structure.) The two most common legal forms in the advisory space are corporations and LLCs. Frey noted that LLCs taxed as partnerships offer significantly more flexibility for mergers. In a partnership structure, a new partner can contribute their book of business in exchange for ownership without triggering a taxable event. In an S-corporation, by contrast, that same contribution is often treated as a sale by the IRS, creating an immediate tax liability even though no cash changed hands. For firms that want the flexibility of an LLC partnership and the FICA tax savings of an S-Corp election, there is a hybrid solution: an LLC taxed as a partnership at the operating level, with each partner holding their interest through an individual S-Corp holding company. It adds complexity, but it gives you the best of both worlds. The takeaway: address your entity structure before the merger conversation heats up. Trying to restructure and merge simultaneously can be overwhelming. If your entity is already in place, SRG’s entity maintenance program ensures your governance documents and compliance stay current as the business evolves. For more on how entity structure supports growth, see Set Your Firm Up for Success — Using Entity Structure to Unleash Growth. Step 2: Define Your Ideal Merger Partner Not every merger is a good merger. As Frey put it during the webinar, a merger is “almost like a marriage, just on a business level.” You want to build trust and rapport before proposing anything formal. Finding the right partner requires honest self-assessment and intentional criteria. Your ideal merger partner should be similar or complementary to your business. Frey recommended evaluating potential partners across several dimensions: Revenue sources and service model compatibility. If one firm operates primarily through in-person client meetings and the other runs on virtual engagement, there needs to be a plan to reconcile those models or you risk losing clients during the transition. Client types and demographics. Complementary client bases can be a strength, but mismatched expectations around client service intensity can become a source of tension. Growth goals. If one partner is aggressively pursuing growth while the other is winding down toward retirement, that misalignment needs to be addressed through compensation structures rather than equity adjustments, which can create IRS audit complications. Once you have identified a potential partner, start by networking through broker-dealers, professional conferences, centers of influence, and business coaches. Build the relationship before introducing formal merger conversations. (For practical guidance on early-stage partnership conversations, see Teaming Advice When Preparing for a Merger.) When the time is right, sign an NDA and begin sharing financial information through a structured due diligence process. At minimum, you should be requesting three years of financial history with a deep dive on the trailing 12 months, a breakdown of the client base (demographics, asset distribution, concentration risk), staffing levels and compensation commitments, any existing equity-sharing or profit-sharing promises, major contract terms and expiration dates, and each owner’s goals —

Financial advisor pay is ‘one of the most powerful strategic levers’ for RIAs

By: Tobias SalingerPublishing Date: March 17, 2026 Far from simply being a recruiting and retention tool, financial advisor compensation plans are turning into important growth and valuation engines, according to succession planning experts. Registered investment advisory firms or other advisory practices must create career paths and pay plans that evolve quickly enough to keep up with industry competition, advisorcareer advancement, geographic factors and the company’s long-term goals, according to a webinar last month on compensation trends led by Julia Sexton, the director of strategic organizational planning at consulting firm Succession Resource Group, and Ryan Grau, the company’s director of valuations. They presented the first of what will become an annual compensation study based on data from the RIAs that use the firm’s services. And the central takeaway revolved around the divergent impact among firms that have taken proactive steps, and those that haven’t. “Today isn’t just about benchmarking numbers,” Sexton said. “It’s about aligning compensation with role, clarity, behaviors, growth objectives and long-term enterprise value, because when compensation is designed intentionally, it becomes one of the most powerful strategic levers that you have in your firm and is so critical to so many transaction and business growth initiatives, succession planning, viability and just the overall cultural and financial health of your business.” On the other hand, Grau jumped in to add, failing to build an effective compensation strategy is “one of the quickest ways to derail value.” To read the full article, please visit: https://www.financial-planning.com/news/financial-advisor-pay-is-a-powerful-strategic-lever-for-rias Disclaimer This article was first published by Tobias Salinger The original article can be found here. All rights to the original content are held by FinancialPlanning.com.

Grow Your Advisory Firm Without Limiting Your Exit Options

Last Updated: August 25, 2026 Authors Growth builds momentum. It creates new opportunities, expands your client base, and can increase enterprise value. But growth also forces us to build structure. Over time, that structure shapes your future transition options. Decisions around equity, compensation, leadership, client relationships, and governance can either expand your optionality, or quietly limit it. Advisors make decisions about their firm, often without thinking about the downline impact. Without intentional planning, it is easy to paint yourself into a corner through years of choices, and end up with only one viable exit option. Think of it this way: if a client walked into your office with $5 million to invest, but told you they were retiring in six days, you could still help them. But, imagine how much more you could have done if they had come to you five or ten years earlier. The same principle applies to your business and planning for your eventual exit. The firms that get the highest valuations are not simply the fastest growing. They are the ones built to be scalable, transferable, and adaptable, giving them multiple transition options. The Earlier You Start, The More You Control Every business owner will exit at some point. The question is not “if,” but “how,” and how well. The earlier you begin planning, the more control you retain over that outcome: Earlier planning leads to more transition options More options create a stronger negotiating position Better preparation leads to maximum value for the founder This is why the best-prepared firms often begin planning 10 or more years in advance. Without that runway, decisions become reactive. With it, you can build intentionally while preserving flexibility. And regardless of which path you eventually choose, internal succession, merger, private equity partnership, or external sale, the foundation you build today will determine the options available to you tomorrow. Universal Do’s and Don’ts to Preserve Optionality For advisors who are still evaluating their long-term direction, the goal is to have options and remain flexible. That means avoiding decisions that unintentionally lock the business into a single outcome, or making decisions that will provide you options. Across firms, a consistent set of patterns either supports or limits future flexibility. Ownership Structure Do: Understand how your entity structure and equity design impact future transition options. Many firms are operating with the same entity they set up when they first launched, which was adequate at the time. But, what worked then may not serve you now or in the future. As your firm grows, revisit your entity structure to ensure it is still optimal for your short and long-term succession and growth goals. Most of the time, what you had twenty years ago isn’t ideal for where you are today. Don’t: Distribute equity without buyback or bring-along provisions. If you share equity, make sure your agreements preserve the flexibility to steer the business in the direction you choose. Client Relationships Do: Delegate client service work to your team, freeing you up to mentor, train, manage, and grow the business. Also – as you hand off client relationships, ensure you have appropriate protections in place so team members can leave and take your clients. Non-competes are difficult to use and hard to enforce – there are other better ways to protect your practice. Don’t: Overcommit ownership or transition expectations without formal agreements in place. Informal arrangements may feel sufficient today, but they create significant complications during a disagreement or transition event. Financials Do: Maintain clean and clear financials over multiple years and invest in scalable growth. Predictable financials, where the chart of accounts doesn’t shift dramatically year to year, are essential for any planning or transaction process. Know your P&L. Don’t: Compensate employees at levels that undermine owner economics. A common pitfall: team members receiving variable, revenue-based compensation without bearing the risk or downside of ownership. When it comes time for those team members to buy in, the math (especially when risk-adjusted) simply doesn’t work. There is no faster way to decimate your value than to pay your advisors using a percentage of revenue on clients you assigned to them. Organizational Resilience Do: Build a team that allows the business to grow beyond the founder. Gen1 mentors and trains Gen2. Gen1 and Gen2 work to mentor and train Gen3, and so on. Whether you plan to sell internally to your team, or to a competitor, a well-staffed firm that can operate independent of the founder will unlock the best outcomes. Don’t: Assume the right transition option will materialize without preparation or that qualified team members automatically want to be successors. Desire and capability are two different things, and you need both. Legal and Compliance Do: Keep entity documents, employment agreements, and compliance records current. Every team member, especially client-facing advisors, should have a formal agreement in place. Don’t: Wait until due diligence to address gaps. Problems discovered at the ninth inning are far more expensive and stressful to resolve than those addressed years in advance. Understanding the Four Primary Transition Options Most financial service firm transitions pursue one of four paths. Each requires different preparation, timelines, and trade-offs. Internal Succession Typical timeline: 5 to 10 years (from the first sale to the last) Internal succession focuses on transitioning ownership and leadership to the next generation within the firm. To do this effectively, firms must: Recruit and retain quality advisors and leaders Mentor and train employees to become viable successors Develop leadership capabilities over time Implement equity sharing plans as part of the career track Gradually transition client relationships before the founder’s exit One of the most important things to clarify early is your “why.” Internal succession typically prioritizes legacy, continuity, control, and minimizing disruption for clients. It is unlikely to produce the highest value for the founder, compared to an external transaction, but for many founders, value is not the primary goal. “When it comes to internal succession, you should be convicted in the outcome — transferring the business to your successors

Financial Advisor Compensation Guide for Advisory Firm Owners

Last Updated: August 25, 2026 Author What’s “Fair” Advisor Compensation? Compensation is both the engine that drives a service-based advisory firm and the issue that keeps firm owners up at night. Everyone wants to pay their people fairly, but what fair looks like depends on your firm’s size, structure, growth goals, and the roles people actually play on your team. The challenge is that many advisory firms are still running compensation models that were designed for a different era; one where individual production was the primary measure of value and every advisor operated as a standalone business under a shared brand. Those models worked when the industry looked that way. For many firms, the industry no longer does. In a recent episode of The Fine Print Podcast, David Grau Jr. sat down with Julia Sexton, CVA, who leads SRG’s compensation design, employment agreements, and equity sharing services, to walk through the key decisions that firm owners face when redesigning compensation. This article distills that conversation into a practical guide — organized around the decisions you need to make, in the order you need to make them. Start with the Data: Know What the Market Is Actually Paying Before you redesign anything, you need a reliable baseline. Strategy aside, if your compensation is 40% above or below the market for similar roles, you have a problem that no structure can solve. For years, the industry relied on the Investment News / Moss Adams compensation study as the go-to benchmarking resource. It had an interactive dashboard where you could filter by firm size, region, and role. That resource was eventually shuttered, and while it has returned in a free version, it now pulls from government sources rather than industry-specific survey data — making it significantly less reliable for advisory firms. SRG developed its Talent Strategy Report (TSR) to fill that gap. Rather than relying on self-reported survey data, the TSR draws from thousands of valuations performed annually — meaning the compensation data has been vetted, reviewed on calls with firm owners, and confirmed for accuracy before it enters the data set. The report covers compensation by role, firm size, and staffing benchmarks so you can see what peers at similar-sized firms are paying and how they are staffing. A few things worth noting from the data: Location matters less than it used to. With remote work now standard at many firms, geographic premiums have compressed. Compensation for the same role is more consistent across regions than it was five years ago. Firm size does not create as big a gap as you would expect. A lead advisor at a $3 million firm and a $7 million firm often earn similar total compensation — but for different reasons. Smaller firms tend to pay more per person because each person wears more hats and larger firms requiring more bodies are able to specialize more in each role. So maybe at the core, a larger firm is ‘paying more’ for the core duties of the specific role, but the reality is that smaller firms have similar if not the same tasks and responsibilities, just shared across less people – so we don’t see this changing. You should be checking this at least annually. Compensation benchmarking is not a one-time exercise. At minimum, pull updated market data every year — every other year at the outside — to make sure you are staying competitive. The bottom line: any compensation redesign should start with current, reliable data. If you are working from a study that is three years old or based on a survey with a few hundred respondents, you are building on a shaky foundation. Choose Your Model: Grid-Based vs. Ensemble Compensation This is the foundational decision, and it flows directly from a bigger question: what kind of firm are you building? Grid-based (production-based) compensation assigns each advisor a book of business and pays them a percentage of the revenue they manage — typically 30% to 45%. It is simple, familiar, and effective at incentivizing individual production. It is the model that most of the industry grew up on, originating in the wirehouses and migrating to the independent channel as advisors went out on their own. Ensemble (team-based) compensation pays advisors a base salary reflective of their role and responsibilities, with variable bonuses tied to specific goals and behaviors, and potentially a share of firm profits. It is designed to incentivize collaboration, specialization, and enterprise value. The critical insight is that your compensation model will drive behavior whether you intend it to or not. If you pay advisors on individual production, they will optimize for individual production — even if you tell them you want collaboration. You cannot put the incentives in one place and expect behavior in another. About 95% of the teams we talk to say they want to build a collaborative, team-based firm. Yet many of them are still running a production-based compensation model. If that describes your firm, the structure and the strategy are in conflict, and compensation will win that fight every time. That said, grid-based compensation is not inherently wrong. If your firm genuinely operates as a collection of individual practitioners under a shared brand — what we sometimes call a “team in name only” — then production-based pay is aligned with that reality. The problems arise when the stated goal is collaboration and scale, but the compensation model still rewards siloed behavior. Before redesigning anything, be honest with yourself about your firm’s long-term goals and strategy. Are you building an integrated enterprise, or are you running a platform for independent advisors? Either is valid. But the compensation structure needs to match. The Hidden Cost of Grid-Based Compensation Even if a grid-based model made sense when your firm was smaller, it can become a serious liability as you grow. Here is the math that tends to catch firm owners off guard. You assign an advisor 100 households representing $100 million in AUM and $1 million in annual fees. You