TRANSITION TALK

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

Accessing the Next Stages of Growth

Posted by Kem Taylor on Jul 17, 2019 11:02:25 AM

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Over the last ten years, increasing numbers of advisors have begun the process of creating sustainable businesses. Many advisors started out as a book or a practice—one-generational models. They took steps to create much more valuable, multi-generational businesses by focusing on enterprise strength and setting up or restructuring essential business structures.

The M&A marketplace is becoming increasingly competitive. Businesses need a strong value proposition to step away from the crowd. Owners who have taken steps to work on building their enterprises are in the best position to leverage their unique business aspects to access more growth opportunities and become successful acquirers or merger partners. 

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Topics: Succession Planning, Multi-Generational Ownership, Organizational Structure, Business Growth, M&A, Sustainability

Impact of Consolidation

Posted by David Grau Sr., JD on May 8, 2019 1:09:44 PM

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There has been a fair amount of talk over the past decades about consolidation in the financial services industry. Most of the white papers and articles addressing this concept have presented it in a negative light as though it signals the end of the lifestyle practices that dot the landscape in this profession. Industry regulation, growth, technology, fee compression, competition, and aging advisors forced smaller practices to consolidate just to survive. At least that was the working theory.

As the original organizers of the open marketplace for independent advisors seeking to sell or to acquire, we have a slightly different perspective on consolidation; we view it in a very positive light. Consolidation looks very different than what the prognosticators laid out decades ago. From our vantage point of working with businesses below $2 billion in AUM, we’ve observed the industry is indeed experiencing some consolidation, but not only due to acquisitions or roll-ups by companies like Focus Financial, United Capital, or Dynasty. The consolidation that we see every day is owners of stronger, sustainable enterprises acquiring smaller, one-generational books and practices.

Viewed in this light, how better to look after 250 clients or households when a single-owner advisory practice nears retirement than to find a very similarly structured business that can step in, take over, and provide for the staff members as well? This process works for the buyers, the sellers, and, most importantly, the clients.

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Topics: Multi-Generational Ownership, Organizational Structure, Business Growth, M&A, Sustainability, Trends in Transactions Study

Structure, Sustainability, & Acquisition Strategy

Posted by Christine Sjölin on Feb 6, 2019 12:03:31 PM

Structure, Sustainability, and Acquisition

If you’ve spent much time around Portland, Oregon, you know tap houses, microbreweries, and brewpubs are about as prolific as coffee shops. The Pacific Northwest takes their food very seriously, and beer and wine are an integral part of that. In the early days, first-generation craft brewers (and their counterparts in the wine industry) were entrepreneurs or career changers who wanted to break free from the corporate world and be their own bosses. Businesses began in garages and strip malls—small spaces that provided just enough room to get the businesses off the ground. Small brewers, looking to increase scale and reduce their individual costs, collaborated to share expenses for equipment or to piggy-back on each other’s licenses. Founders have shown grit, resourcefulness, and thrift to further their businesses through the first stages. Now, the most successful operations are evolving and acquiring, and the next generation of professionals are entering the industry with specialized degrees and focus on their careers. Meanwhile, boutique and even once “cult” brands struggle to maintain their position amidst stronger competition and a consolidating industry.

Does this sound familiar? The issues of scale, expense management, and growth planning are not unique to financial services. Other professionals begin their businesses with similar limitations, which they must address and overcome in order to reach a baseline of success. Passion and perseverance are powerful fuel, but the challenge comes—for financial advisors as well as craft brewers—in creating a business that can support sustainable growth. Oftentimes, the skills necessary to make this transformation are not innate to the business owner and reluctance to seek help is precisely what hinders their growth or even survival. As entrepreneurs who are passionate about their field, getting outside guidance is necessary to overcome their limitations and see the business into the next stage.

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Topics: Acquisition, Organizational Structure, Business Growth, Sustainability

The Three Pillars of a Successful Advisory Business

Posted by David Grau Sr., JD on May 24, 2018 2:26:19 PM

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In my work, I’ve become a “professional traveler,” so I spend a lot of time in airports, and I get to talk to many of the pilots. Airline pilots are adventurous souls who enjoy finding ways to go faster, fly higher, and see things from a level that others cannot. They are also very methodical and go about everything with a checklist mentality, a clear purpose, and as much knowledge on the subject matter as they can muster. I find a lot of our entrepreneurial advisors to be cut from the same cloth. The goal of building something bigger, stronger, and better, helping clients with a different view of the financial world, and then sharing what they’ve built with others is woven into the very fabric of their being. Entrepreneurs like to grow, and they like to do things right.

Growth, of course, can mean many things. You might want to grow your top line revenue and assets under management. Maybe you’re looking to hire and build your team in order to improve client experiences. Perhaps you want to acquire a practice–or two–to quickly grow revenue, assets, the client base, and your own income. But, just like a pilot who wants to go faster and fly higher, eventually you’re going to need a larger plane, a stronger engine and airframe, even additional skills that maybe you don’t have–or don’t necessarily have a passion for developing.

Over time, we’ve seen that independent advisors don’t naturally build large, profitable, sustainable businesses. The ambition is there, and recurring, fee-based revenue certainly helps, but the skill-sets that prompt most of you to hang out your own shingle and start gathering clients who entrust you with their financial goals and assets are different than what it takes to run an organization of professionals and create scale. For these reasons and others, this is still more an industry of book builders than it is of business builders.

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Topics: Compensation, Succession Planning, Organizational Structure, Business Growth, Entity Structure, Sustainability, Building Your Team

Ship vs. Liferaft - What Are YOU Building?

Posted by FP Transitions on Dec 6, 2016 9:17:33 AM

Ship vs. Liferaft - What Are You Building - Enity Structure

Picture a bright orange life-raft floating on a dark blue, storm-tossed ocean. In this durable, well-built, small craft sits an independent financial advisor. Our advisor has a paddle for propulsion – the means by which to move the raft to safer or more prosperous waters. Our advisor has the means to collect and store rain water for drinking, and fishing tackle to bring in food for survival – the craft literally is floating on a sea of food and fuel to sustain and propel its lone occupant. Our advisor also has a compass for navigation to guide forward progress along a chosen route. 

In terms of organizational structure, this sole proprietorship model is a common starting point for many advisors. With this model a single advisor is compensated on an “eat-what-you-kill,” basis–the clients are under his or her service; he or she receives 100% of the revenue to pay their own individual expenses, and takes 100% of the profits (if any) that remain.

To its credit, this basic production-based, or advisor-driven, model is extremely adaptable and simple to establish and operate. And while it may work for a single advisor office where there are only business expenses and compensation for one, it should not be mistaken for a building block for larger, more sustainable business models. Unfortunately, it often is.

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Topics: Compensation, Equity, Organizational Structure

[FP WEBCAST] Organizational Structures

Posted by FP Transitions on Feb 29, 2016 1:00:00 PM
When a single advisor with a single book of business reaches a certain level of complexity it makes sense to move it into an entity; an entity with a structure that will support business evolution and growth.

Unfortunately, as businesses evolve from single advisor, single book to a more established entity they tend to move into a structure that leads to value that is attached to individual client books within a business rather than to the business itself. This is because, as practices grow and add more advisors, they are onboarded using revenue splitting agreements keeping the books siloed. And, as Brad Says, “If your books are siloed, you’re not a firm – you’re essentially just roommates sharing paper.”

The key to avoiding this is to set up an organizational structure that is an actual business unit instead of just an accounting conduit.

Our new webcast explores different ensembles, and how an improper organizational structure can be dangerous for the ongoing growth and value of your business. We’ll also discuss structures that will ensure your value is tied to your business as a whole and will promote the longevity and sustainability of your firm.
 
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Topics: Webcasts, Equity, Organizational Structure, Enterprise Strength, Revenue Sharing, Entity Structure

Brad Says ...

Posted by FP Transitions on Jun 19, 2015 9:54:58 AM
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Topics: Organizational Structure, Business Growth, Sustainability

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