TRANSITION TALK

Don't Forget to Take a Vacation!

Posted by Kem Taylor on Jul 20, 2020 4:12:35 PM

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I recently checked in on a client and she mentioned that she had to remind her staff to take vacation. As a small business owner, she wears many hats including H.R. As she processed payroll week after week she noticed her staff wasn’t requesting PTO. Her immediate concern was that employees would lose their accrued time off if they didn’t use it. More importantly, time away from work is necessary to get rested and charge your batteries.

Admittedly, “going on vacation” in these times may just mean closing and locking the door to your home office or taking your laptop and files off of the dining room table and putting them away for a few days. However, depending on where you live, you may be able to go out and safely explore local parks and trails or even go camping.

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Topics: Culture, Sustainability

The Four Greatest Opportunities for Financial Advisors

Posted by FP Transitions on Jul 16, 2020 7:27:21 AM

Four Opportunities for Financial Advisors

Today’s Independent financial advisors face an endless array of challenges and opportunities. Identifying challenges before they arise is key for finding solutions and developing strategies for tackling the issues that present the greatest opportunities for improvement and growth.

The four biggest opportunities are:

  • Balancing Growth and Profitability
  • Recruiting and Retaining Talent
  • Creating Business Sustainability
  • Growth Through Mergers and Acquisitions

Balancing Growth and Profitability

Growth and profitability are inextricably linked and balancing the two within a single practice is the difference between building a one-generational practice and a multi-generational, sustainable enterprise.

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Topics: Compensation, Succession Planning, Acquisition, Business Growth, Mergers, Talent Recruitment, Sustainability, Enterprise

Preparing for Success in the M&A Arena : Pre-Qualifying for Bank Financing

Posted by Kem Taylor on Jun 10, 2020 1:59:16 PM

Preparing for Success in the M&A Arena

Acquiring a wealth management practice brings immediate growth and is an alternative to spending money and time on marketing to find new clients. That’s why there is currently an average 75-to-1 buyer-to-seller ratio. If you’re going to succeed in this arena, you need to stand out from that crowd. If you don’t have the cash on hand, one of the best steps you can take is to become prequalified for a conventional or Small Business Association (SBA) loan.

Twenty years ago, most acquisition deals consisted of a down payment of around 30% with the balance seller-financed through an earn-out arrangement. As fee-based practices became more prevalent, buyer demand increased. The combination of recurring revenue and increased demand pushed values higher and, in time, strengthened the underlying deal terms as well. Gradually we witnessed a shift to the use of performance-based promissory notes in place of earn-out arrangements. And, in the last seven years or so, the landscape changed yet again when the availability of bank financing entered the picture. This has afforded younger, smaller buying firms the opportunity to compete financially with larger, more established firms.

A place to start accessing this financing is to prequalify for a loan. A bank will review your finances and give you an estimate of how much they will lend to you. A bank’s prequalification tilts the acquisition playing field in your direction; you can knock out 90% of the competition. Sellers like the security prequalification brings to the transaction. In addition, you’ll be ready to move quickly if there’s a new opportunity or if a seller has a short time horizon.

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Topics: Acquisition, Bank Financing

Monitoring the Health of Your Business with Annual Checkups

Posted by Mike McKennon on May 28, 2020 10:57:46 AM

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Completing an annual valuation on your business is the financial service industry equivalent of undergoing your annual physical. I’ll turn 55 this year and I have resigned myself to the fact that prescription medications have officially become their own food group and an annual physical is no longer optional. My annual pilgrimage happens to take place in the spring tucked neatly amongst the sporadic appointments to see specialists for knees, elbows, near sightedness, far sightedness, rotator cuffs and something about my lumbar.

Now, the key word here is annual. If I had my cholesterol checked 10 years ago and then never again how am I going to know if what I am doing is working? An annual examination provides a historical record of your overall health including your vital signs enabling you to make changes in order to perform at your best. The good news is that, unlike my annual physical, your valuation results should get better as your business matures.

Your business is a living, breathing entity. Just like the investments you make on behalf of your clients, it needs to be nurtured, protected, and developed in order to realize its maximum value. It’s important that your valuation be updated annually. The monetary value of your practice is just one of many pieces of information to be gleaned from a professional business valuation.

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Topics: Acquisition, Business Growth, Business Value, Exit Planning, Continuity, Benchmarking

My First Virtual Conference!

Posted by Kem Taylor on May 22, 2020 11:04:00 AM

My First Virtual Conference

I had been looking forward to attending the Investment News Women Advisor Summit, but when an in-person event was no longer an option I was excited when Investment News did the ultimate pivot and changed their all-day onsite Summit to a virtual webcast.

Hotel and meeting rooms were cancelled, and their technology team got to work. The webcast was scheduled for May 14th. Attendees received an email the day before with directions on how to view the event that included a great video introduction from Liz Skinner.

A Digital Experience

I’d been wondering how a conference would work virtually. I didn’t know what to expect and it was easy. The eight sessions were listed on a main page. At the beginning time of the session, you just clicked the session’s “View Now” button, and you were connected. You could see each speaker and it was easy to access their bios, slides, and resources.

There were 600 people attending and speakers from 10 different cities–their largest event ever! Questions could be submitted throughout the sessions and were posted and answered in real time on social media using @investmentnews and #womenadvisersummit2020. Every session had a different topic and a bit of a different format which helped the time fly by.

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Topics: Commentary, Investment News, Events

Synthetic Equity

Posted by FP Transitions on May 6, 2020 10:43:48 AM

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Equity-based compensation provides an excellent solution for practice owners who need a reward system that goes beyond the traditional salary/bonus structure and shares the economic value of equity, but not equity itself. 

A critical element in the success of any small business is its ability to recruit, reward, and retain talented advisors and support staff. To this end, equity compensation is often used to achieve these goals. Synthetic equity is a tool set that can provide ownership-level benefits without buying or selling actual stock in an advisory business.

To be clear, the process of transforming a single-owner practice into a sustainable business generally relies on equity. Equity, or stock, is what next-generation advisors invest in, and over time and with hard work benefit from, above and beyond what compensation alone can provide. Equity is the shareholder value created in a business managed from a bottom-line up perspective with a focus on earnings or profits as the ultimate financial goal. Equity is a powerful building and motivational tool, but with the opportunities come obligations. Because of these obligations, buying or selling equity isn’t the only way to offer key employees ownership-like benefits, nor is it always the best option.

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Topics: Succession Planning, Equity, Multi-Generational Ownership, Business Growth, Talent Recruitment

Marketplace Activity : Recently Sold Practices

Posted by FP Transitions on May 4, 2020 10:46:00 AM

Even with market volatility over the past few months, the marketplace for financial advisory businesses has remained strong. FP Transitions is pleased to announce the recent sales of financial services businesses in the following areas :

  • Palm Beach, FL  |  $6,000,000
  • Houston,TX  |  undisclosed
  • North Carolina  |  undisclosed
  • Rhode Island  |  $1,500,000
  • San Francisco Area, CA  |  undisclosed
  • South Carolina  |  $3,600,000
  • Sacramento Area California  |  undisclosed
  • Atlanta Area, GA  |  undisclosed
  • Miami Area, FL  |  $350,000
  • Lafayette Parish, LA  |  undisclosed
  • Rhode Island  |  $700,000
  • Houston, TX  |  $1,100,000
  • Chicago Area, IL  |  $120,000
  • Northwestern, TX  |  $450,000
  • Boston Area, MA  |  undisclosed
  • Florida Panhandle  |  undisclosed
  • Tampa Area, FL  |  $750,000
  • North Carolina  |  $450,000
  • Michigan  |  $1,200,000

VIEW CURRENT LISTINGS HERE 

LIST YOUR PRACTICE WITH FP TRANSITIONS

State of the Market: Outlook for Advisory Firm Valuations [Webinar Replay]

Sold announcements include all closed third-party transactions facilitated by FP Transitions, including private listings, pre-arranged matches, and those listed on the open market. 

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Topics: Selling Your Practice, Acquisition, Buying & Selling, SOLD

Offers in the Mail

Posted by David Grau Sr., JD on Apr 30, 2020 1:13:11 PM

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For many financial advisors, it has become commonplace to receive unsolicited offers in the mail. The offers to buy practices usually promise a competitive valuation and purchase price, great terms and future opportunities, and are backed by private equity, bank financing, or other cash reserves. More than anything, these letters bring hope, choices, and affirmation that an advisor has built something valuable and transferable.

Some of these letters arrive from well-known firms but many are from smaller, previously unknown suitors whose marketing strategy is to grow rapidly through practice acquisition. The advisors we talk to on a daily basis tell us about these letters dismissively at first, but they also say they keep the letters for future reference–just in case. Hope and choices are good things, even if they’re not needed today.

It is always flattering to be recognized, wanted, and valued, even if your name comes from a purchased mailing list. The more important point may be that these letters get many independent advisors, like you, thinking and wondering about the future. Questions arise: What is my value? What options do I have? Is this the best offer, or maybe the only offer, I’ll ever get? Can I sell my practice and keep working, given that I’m not ready to fully retire right now?

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Topics: Selling Your Practice, Acquisition, Due Diligence, Buying & Selling, Press Release, Transactions

Virtual Meetings : Looking Your Best [Video]

Posted by Alex Moan on Apr 13, 2020 10:22:15 AM

Virtual meetings are becoming the new normal. Taking a few moments to arrange your visible workspace, leverage what have at home to improve lighting, and frame yourself onscreen can do wonders for looking your best through virtual communications. Our Video Marketing Specialist, Alex Moan shares some tips in the video below. 

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Topics: Education, Business Growth, Culture, Client Relationships

Controlling What You Can, Learning From What You Can’t

Posted by Marcus Hagood on Apr 1, 2020 4:44:25 PM

Controlling What You Can, Learning From What You Can’t

“Instead of focusing on the circumstances that you cannot change—focus strongly and powerfully on the circumstances that you can.” –Joy Page

One of my favorite movies of all time is Casablanca. This 1942 American romantic drama is revered for its cinematic quality, lead characters, fantastic writing, and pervasive theme song “As Time Goes By.” It is set in a time of war, upheaval, and great uncertainty; in fact, the movie is the perfect foil for the underlying message that we control our fate through direct action. There are many scenes that highlight that message, but Joy Page was a part of one particular scene that foreshadows the ending of the movie and reinforces her thoughts as expressed above.

In this scene, Humphrey Bogart, playing the lead character Rick Blaine, tells the husband of a newly-wed Romanian couple to make a bet on the roulette table at Rick’s Café Américain casino. To summate the plot line, earlier in the movie, Rick had turned down helping the newly-wed wife played by Joy Page citing that he helps no one to avoid the suspicion of the Vichy police.

As the plot line continues, Rick has a change of heart and whispers in the husband’s ear to make a risky bet on the rigged roulette table. With a little help, the husband wins enough money to buy a passage out of Casablanca for himself and his new wife. The action that Rick takes in this scene foreshadows his later actions that free Victor Laszlo and his wife, Ilsa Lund, from the Germans and Vichy Police in Casablanca. The rest is cinematic history.

In times of uncertainty, it is always wise to focus on what you directly control, as pointed out by Ms. Page’s quote. Whether we look at current politics, markets, regulation, news, or the current state of the financial services industry, there have been (and always will be) many events outside of your control as a practice owner that affect your work. How do you deal with this constant noise? Recognize it for what it is and focus on the things you can control with direct action.

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Topics: Commentary, Organizational Structure, Business Growth, Continuity, Talent Recruitment, Sustainability

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