This blog post is part of a series highlighting Advisor Legacy team members. As Managing Director of our Acquisition and Legacy Planning services, Todd Doherty melds his background as a business owner with his experience in the financial services industry to help advisors manage their equity and navigate M&A transactions

Recently we talked about how important it is to communicate succession plans to clients before and during your actual transition. So often, advisors overlook the importance of communicating their succession plans to staff. Many advisors think it’s best to wait until after the deal is closed before telling their team, but this is something we have seen create tremendous problems for both the selling advisor and the buyer.

This blog post is part of a series highlighting Advisor Legacy team members. Any business is only as good as its ability to deliver on its promises. Vicki Walton ensures that we do. As Operations Manager, Vicki keeps everything running smoothly at Advisor Legacy. She provides back-office support for all aspects of our M&A team and is continually working with the team to improve operations, create new efficiencies, and ensure team members are aligned when delivering services.

You spend decades building your practice. During that time, you cultivate and nurture strong relationships with your clients and your staff. With so much invested, you want to make sure that you find a worthy successor to carry the torch. Finding a worthy successor is a combination of knowing where to look for a possible candidate, how soon you need to start looking, and then knowing what to look for when vetting prospective successors.

We’ve heard it all before. The story about the cobbler’s children having no shoes. When it comes to financial advisors the story is the same. They spend their careers helping clients not only plan and prepare for their ideal future, but also for the unexpected events that could happen. Yet when it comes to protecting their own future and the future of their practice, advisors are still walking around shoeless, metaphorically speaking.

The last several years have taken their toll on everyone. Navigating a pandemic, along with volatile markets, shifting work cultures, and large-scale cultural changes has forced many advisors to work long hours while dealing with excessive stress and worry. When markets are turbulent, clients naturally demand more of an advisor’s time and attention, making it very hard to create a work life balance. As a result, many advisors are experiencing burn out.

Recently, a number of experts that specialize in RIA M&A have claimed that practice values are reaching their peak and will soon feel the effects of a volatile market and decreased demand for acquisitions. What these experts failed to articulate is that they work within a very narrow segment of the industry, mainly among large consolidation firms. The bulk of the industry is comprised of small and mid-sized practices operating not only under the RIA umbrella, but under IBDs and wirehouses too. This is the sector of the market where most of our work is done and from what we have seen, practice values continue to rise with no sign that they will slow any time soon.

Selling a financial advisory practice is a once in a lifetime event, one that can have a tremendous impact on an advisor’s life and family. Yet too many advisors approach this major occasion in their career with little care and planning, or with straight up avoidance and despair. It’s a case of “the cobbler’s children have no shoes,” in that most advisors fail to seek out professional guidance and to plan their own retirement, despite building a career helping clients plan for theirs. That lack of planning can lead advisors to commit several big mistakes when it comes time to sell their practice.

Most advisors will only sell a practice once in their lifetime. It’s no wonder then that many advisors are woefully unprepared for that experience. Many also wait until they officially want to sell to start the process. They don’t take the time to educate themselves on the process and the many factors that can impact the timing, quality, and structure of their practice sale.

As with any industry, there are many myths that can falsely influence an advisor’s decision about their career and their practice. We’ve talked before about the myths around practice value that can negatively impact an advisor’s equity. There’s another myth that is as equally pervasive, and equally detrimental to an advisor’s retirement. We call it “The Five-Year Myth.”

Clients are the lifeblood of a financial advisory practice. Yet when it comes time to an advisor’s succession, they often forget to include their clients in the equation. Finding the right successor to take care of your clients isn’t enough. You have to include your clients in your succession plans and communicate with them every step of the way. It’s a big part of closing out what we like to call your “Client Service Legacy.” When thinking about your succession and its impact on your clients we like to use what we call the “Grocery Store Test.” Imagine it’s a couple of years after your transition and you happen to run into one of your clients at the grocery store. Will they be happy to see you?

2020 broke many records for advisor M&A. As the pandemic continued to force rapid change and create uncertainty, M&A remained steady and strong throughout 2021. There were many positive changes, and some interesting trends that emerged, many of which will carry on into the coming year.

Rising emphasis on continuity planning – but still not where it needs to be.

When selling a practice, financial advisors have more options than ever before. Advisors can sell in different stages, or all at once, and have an array of qualified buyers to choose from. One question advisors looking to sell should ask themselves is, should you sell to an aggregator or a small firm? There are pros and cons to each option, which we break down below.

Attrition Clause

Ways to Buy a Financial Advisory Practice

To the Sale of a Financial Advisor Practice

Methods for Valuing a Financial Advisor Practice

Why A Seller Won’t Sell Their Practice to You

An aging client base hurts your practice value.

Selecting Qualified Experts To Help You Sell Your Practice.

Learn how to spot a good buyer fit for your - it goes beyond price.

Why it's better to work with an independent succession expert instead of your broker-dealer's.

Our advice on how you should think about the difficult decision to sell your practice.

Before you sell your practice, avoid these common mistakes that sellers make.

See what factors impact valuation prices.