Today’s independent financial advisors face an endless array of opportunities (and challenges). The key is to identify impediments before they arise and to develop strategies for tackling the issues that present the greatest opportunities for improvement and growth.
There are four main challenges essential to the success of your business:
Topics: Compensation, Succession Planning, Acquisition, Business Growth, M&A, Next Generation, Talent Recruitment, Enterprise
In our first book “Succession Planning for Financial Advisors,” founder David Grau Sr., JD recounted one advisor’s early succession journey, including his ownership team’s bumps and triumphs as they executed the first tranches of their plan. Today, David circles back to provide an update on the successor team and all they’ve accomplished in six short years:
Ten years ago, around 2009, the founder and sole owner of Diversified Financial Consultants in Wilmington, Delaware, hired a local business attorney to help him develop a succession plan for his financial planning practice organized as an S-corporation. Calling on a practice’s local business attorney is a common starting point, and interestingly, it seems to be a common failure point when attempting to mesh the goals of the founder and next-gen advisors.. In this case, the founder’s attorney strongly suggested that in order for the founder to maintain full and unfettered control, the best course of action was a phantom-stock plan.The first draft was professional and thorough. It was also rejected out of hand by the team of prospective owners – they wanted to be real owners and investors in the business they were helping to grow.
Topics: Succession Planning, Multi-Generational Ownership, Next Generation, Sustainability, Enterprise
The sustainability of financial services businesses depends on the incorporation of new talent. The demand for next-generation talent continues to increase as longevity, continuity, and staying competitive become top priorities for many financial advisor-owners.
Next-generation advisors are in a unique position to leverage their generational experiences and opportunities that influence business value to carve out their ideal career path.
The demand for financial advice is growing faster than the number of financial planners available to provide it. Household assets are increasing and the number of households with over $200,000+ in income has increased 10% in the last two years and is expected to climb.1 Along with accumulating their own wealth, younger investors are set to receive inheritances from their parent’s generation. The need for asset management is further exacerbated by the fact that the average age of financial advisors trends older so many are set to slow down or retire over the next ten years.
The battle for talent is upon us and it is important to recognize that as a next-generation financial planner, you have more career choices than ever. You can start your own business, or seek employment at a broker-dealer, bank, wirehouse, or RIA. Even those choices have many options within themselves. For instance, in terms of joining an RIA, 15 years ago, small firms were often the only option. Today, you can work for a smaller regional enterprise, a national company with hundreds of advisors and staff, or an RIA somewhere in between.
Topics: Succession Planning, Multi-Generational Ownership, Next Generation, Sustainability, Enterprise
In this Roundtable Talk, the next-generation ownership of FP Transitions discuss their own experiences in taking the mantle to shape the team and future of the business. They explore hiring for cultural fit and potential value, the definition of “ownership mentality,” and how they might identify potential G3 leaders in the generation beyond their own.
Watch a short clip below and click here to watch the full, unscripted discussion.
Topics: Succession Planning, Next Generation, Talent Recruitment, Enterprise
We all know what an entrepreneur is. Many independent financial advisors would likely identify themselves as an entrepreneur.
Many entrepreneurs worked 18-hour days to get their business off the ground and wore all the hats in the company–CEO, Marketing Director, H.R. Manager, IT Coordinator, Bookkeeper, and Visionary. They are their own boss. They create new things. They continuously solve problems. They have initiative. And, importantly, they can tolerate risk more than most people.
A lesser-known term is "intrapreneur."
Topics: Succession Planning, Business Growth, Next Generation, Sustainability, Enterprise
When should you start developing your exit plan or succession plan?
The short answer is: start the planning process early. Successful internal succession planning can be a 10- to 15-year process so give yourself adequate time. For advisors who want to sell externally, the planning process should start three to five years before you think you’re ready to actually sell.
Projecting an Off Ramp
As you forecast your exit timeline it’s important to consider factors like cash flow and how much will be required to move into retirement and maintain your desired lifestyle. You should also consider how long it will take to put your successor team in place and when you’ll be able to hand over the reins completely.
One of the best ways to make a timeline projection is to determine how much time you want to—or will realistically be able to—spend productively working in the office, and create a “workweek trajectory.”
Topics: Succession Planning, Selling Your Practice, Business Growth, FP Transitions, Sustainability, Enterprise, Sell and Stay™
We write a fair number of white papers every year. As thought leaders, it is part of our job to share our thinking with independent financial professionals in order to advance the profession. In our consulting work, our clients often challenge us with thought provoking questions which open us to new ideas, help us to improve, and occasionally challenge basic assumptions behind the work that we perform. Sometimes questions are really out of left field and our curiosity leads us to an answer worth sharing.
Topics: Succession Planning, Business Growth, FP Transitions, Sustainability, Enterprise
In our newest Roundtable Talk, Elite Client Consultant Kem Taylor and President David Grau Sr., JD, discuss the importance of time when it comes to planning, executing, and evolving your succession plan. During the conversation they cover examples of how FP Transitions has helped business owners navigate any changes to their plan including accelerating the timeline, adjusting the next-generation ownership team, and falling back to “Plan B”–selling the business.
Watch a short clip below and click here to watch the full, unscripted discussion.
Topics: Succession Planning, Next Generation, Talent Recruitment, Enterprise
The growth and profitability of your business are interconnected. Top-line revenue growth is essential, but it is no good without bottom-line profitability.
Balancing growth and profitability comes down to compensation structure and the equity pathways created for owners of the business. The profits generated through properly structured equity pathways are a catalyst for growth and the means to accomplish long-term strategic objectives including recruiting new talent, internal succession, and acquisition.
In our newest webcast, VP of Research and Analysis Eric Leeper, CFA®, discusses compensation solutions for businesses in varying stages of growth and how these strategies can boost both top-line growth and bottom-line profitability.
View webcast clip below and click here to watch the full video.
Topics: Compensation, Succession Planning, Equity Pathways, Enterprise
The transfer of ownership to a team of next generation talent allows a business to leverage the individual strengths and fresh energy of a younger generation. As a new advisor, ownership provides stability, equity stake, and voice in the future of the business. As a founder, incorporating this team elevates your business, secures longevity, and sparks a new level of growth. The arrangement creates a win-win opportunity for both the founder and the next generation owners.
In our new Roundtable Talk, Elite Client Consultant, Kem Taylor, and our President and Founder, David Grau Sr., JD, discuss the process of going from next generation advisor to next generation owner and the common questions that come with it. They explore the benefits for both founder and next generation owners as well as the importance of communication between the generations for a successful integration.
Click here to watch the full, unscripted discussion.Topics: Succession Planning, Talent Recruitment, Equity Pathways, Enterprise