With all of the modern tools for practice valuations and equity management solutions available, some financial advisors still choose to use revenue splits, or a revenue-sharing arrangement, as a makeshift succession plan. For a practice owner, this can be a poor and shortsighted business decision for several reasons, including:
Topics: Compensation, Succession Planning, Enterprise Strength, Cash Flow, Sustainability
There are two ways to make money from a financial services business: wages and profit distributions. But, there are four ways to build wealth from the same model:
Topics: Compensation, Succession Planning, Enterprise Strength, Cash Flow, Sustainability
Looking back over the past few decades, you can easily spot the trends and physical changes in our industry. Since 2000, when FP Transitions formally opened its doors, I’ve seen our profession, especially in those working under an independent broker-dealer or hybrid model, steadily shift to fee and advice-based solutions. Early on, most practices that we represented were made up primarily of transaction or non-recurring revenue; today advisors build businesses with a focus on fee-based income streams. Independent insurance companies are evolving as well with a sophisticated and wide array of recurring revenue.
Along the way, these practices have become not just more valuable, they are also physically larger and stronger. This requires more qualified people to analyze, give advice, produce revenue, as well as the adjunct talent to support these professionals. Looking forward, we see an ever increasing need to recruit and retain the best talent in the industry to support not just where your practice is today, but where that growing business will be ten years from now. Everyone has read about the need for recruiting; but the story has shifted in the past few years and will continue to do so going forward. Rather than simply hiring next gen talent as the need arises, this could well turn into a fierce competition to adequately reward and retain that talent as more and more advisory businesses reach the next level of success and draw upon a talent pool that has scarcity written all over it.
Topics: Business Growth, Enterprise Strength, Next Generation, Building Your Team, Equity Pathways
Topics: Webcasts, Equity, Organizational Structure, Enterprise Strength, Revenue Sharing, Entity Structure
1. Invest in Human Capital
Most advisors have built their business from nothing into their single most valuable asset. Data from our 2015 Valuation Database indicates that businesses with multiple professionals accumulate assets at a higher rate than sole practitioners. As your business matures, it is imperative to invest in the next generation of talent, to keep the engine running while you begin to enjoy the reward for what you’ve built.
Topics: Revenue Strength, Enterprise Strength, Business Value
Topics: Webcasts, Equity, Revenue Strength, Enterprise Strength