TRANSITION TALK

Preparing Yourself (and Your Boss) for Ownership

Posted by FP Transitions on Aug 13, 2019 11:22:15 AM

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As a next-generation advisor, pursuing ownership as part of your career path is an important decision. Business ownership requires a variety of skill sets and comes with both benefits and responsibilities that go beyond the role of advisor. Before you consider asking for ownership from the existing owners of your firm, you need to demonstrate that it is not only something you are capable of, but something you have earned.

Starting with these five steps as early as possible will help you build a strong case for ownership:

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Topics: Succession Planning, Multi-Generational Ownership, Next Generation, 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

Rights and Obligations of Equity Ownership

Posted by Kem Taylor on Apr 18, 2019 9:21:21 AM

Rights and Obligations of Ownership

As more wealth management businesses look to internal succession, more new owners are being created. As a next generation advisor, you should consider whether ownership is the right path for you, and it is important to understand what ownership entails. Owners of a privately-held business, even with a minority position, enjoy several rights and privileges in exchange for their investment in the company, but they are also responsible for meeting certain obligations.

The following rights and responsibilities apply to all owners whether the business is a corporation governed by bylaws or a limited liability company with an operating agreement.*

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Topics: Succession Planning, Multi-Generational Ownership, Business Growth, Next Generation, Sustainability

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

If At First You Don't Succeed...

Posted by FP Transitions on Nov 9, 2018 9:53:20 AM

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In 1953, a start-up business called the Rocket Chemical Company and its staff of three set out to create a line of rust-prevention solvents and degreasers. Toiling in a small lab in San Diego, California, they set about to create a “water displacing” formula for use in the aerospace industry. It took 40 attempts to get the formula figured out.

But figure it out they did, and WD-40 was born. The name stands for water displacement formula perfected on the 40th try. Imagine what would have happened if the inventors had given up after two dozen or so really solid attempts?

The story, and the point, of course, is bigger than trying hard and eventually succeeding. WD-40 was initially a product limited to special uses, an example of which was protecting the outer skin of the Atlas missile from rust and corrosion. But that was just for starters. The product actually worked quite well for a variety of other uses–so well that several employees snuck some WD-40 cans out the plant to use at home on more mundane tasks like squeaky hinges and rusty nuts and bolts. The product eventually became a household staple. By innovating and adapting to the market, this small group of entrepreneurs created something great.

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Topics: Acquisition, Buying & Selling, Sustainability, "Buying, Selling, and Valuing Financial Practices"

FPA Annual Recap : Elevating the Profession

Posted by Christine Sjölin on Oct 19, 2018 9:50:20 AM

The last few years I’ve been unable to attend the FPA annual conference due to personal commitments. It was great to be back on site for this year’s event in Chicago.

The Future of the Industry

As an Official Sponsor of the Next Generation, we are tapped into what young advisors are doing, hearing, and saying. It’s an energizing group to be around—the future advisors I met in Chicago view financial planning as a calling as well as a rewarding career. It does strike me as a bit ironic that the “NexGen” community stops at 37 years old, when the average age of a graduate in a financial planning program (as shared during a conversation with university staff) is 41. I suspect these more seasoned career changers will have an easier time making their way into the industry, but it’s important to incorporate the youngest professionals into existing businesses, as they will impact the industry for decades, if they don’t get discouraged. This new generation of advisors are more dynamic and driven than they’re often given credit for, and these savvy younger professionals will continue pushing the status quo to create opportunities for themselves.

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Topics: FPA, Next Generation, Talent Recruitment, Sustainability, Events

BOOK REVIEW: Successful Hiring for Financial Planners: The Human Capital Advantage by Caleb Brown, CFP

Posted by Kem Taylor on Oct 17, 2018 1:01:45 PM

Brown, Caleb. Successful Hiring for Financial Planners: The Human Capital Advantage. Coventry House Publishing, 2018.

Many small financial advisory firms don’t have a Human Resources Department. So when it comes time to seek out, hire, train, and develop employees, those tasks usually fall to the owner. They must figure out where to find candidates, what to ask in an interview, how much to pay, how to set up a training plan, and how to keep them engaged and motivated. That research takes valuable time away from the owner’s other obligations and productivity.

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Topics: Next Generation, Talent Recruitment, Sustainability

Course Corrections for Your Succession Plan

Posted by FP Transitions on Oct 11, 2018 9:42:48 AM

Course Corrections

Building a sustainable business and incorporating new talent into your ownership structure is a process that takes planning and monitoring. But it’s a process that–when done correctly–can yield incredible satisfaction, growth, and value. A process with so many moving parts including multiple parties and expectations is bound to see some bumps. Sometimes those bumps can necessitate larger course corrections in order to keep the plan on track.

There are a variety of situations that can cause a larger adjustment to your succession plan–whether they’re driven  by G1 or G2, positive or negative, preventable or not, and expected or not. Below is an excerpt adapted from a section of Succession Planning for Financial Advisors, written by FP Transitions Founder and President David Grau Sr., JD.

If Founder Plans Change

The whole purpose of a succession plan is to help your business outlive you, so count on this being a somewhat lengthy process. While some plans on paper may go out 20 or more years, they are implemented tranche by tranche, with planned opportunities for reassessment and course changes or adjustments. At a minimum, plan for annual valuations to monitor value, annual benchmarks using that valuation data to track operational numbers, and plan adjustments every five years or so. Depending on the size of the business, the number of owners, and the goals, some businesses and firms prefer more frequent maintenance so that the course corrections are more subtle.

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Topics: Succession Planning, Selling Your Practice, Sustainability

Which Exit Path is Right For You?

Posted by FP Transitions on Sep 20, 2018 11:53:53 AM

Which Exit Path is Right for You?

You’ve built a business providing financial insight to a growing community of clients. You’ve fostered this relationship over the years and established a trusted role in their lives. As your clients have moved along their journey as professionals, entrepreneurs, investors, or heirs, they’ve turned to you for advice at each step; and now they are counting on your business to be there and to see the process through to the end. This means that as your clients transition into their own retirement, they will depend on your services more, not less. Regardless of the plan you choose, it is your duty as an independent financial professional to have a plan for client service and support that extends beyond your own career.

One way or another, your path as a financial planner will come to an end. The question is whether or not you’re going to exit on your own terms and in your own way. Are you going to create a plan for your exit that preserves the value and growth of the business you’ve spent your career building? Are you going to make sure your clients’ assets are in good hands for the length of their lifetimes, not just for the length of your career?

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Topics: Business Growth, Business Value, Sustainability, Benchmarking, Enterprise

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