Top Options for Succession Planning
Succession planning is increasing in importance given the aging of the industry. Succession planning is essentially a plan for the business beyond an advisors’ involvement. It’s also a contingency plan in the event of an unforeseen event. Currently, less than 30% of advisors have a firm succession plan in place. Here are some options when it comes to succession planning.
The first option is an internal transfer of clients and assets to the next generation. It requires both parties to agree upon a value for the practice. The drawback is that often there’s a large gap in this assessment. However, the upside is that the transition for clients has much less friction.
The next option is to sell the practice to an aggregator or integrator. These firms specialize in acquiring RIAs and are often funded by private equity. Typically, this involves giving up control of the business, meaning that the successor has less upside and control due to ownership being diluted.
Another option is to sell directly to a strategic buyer, which is often another financial institution or financial advisor practice. This entails some sort of transition period to merge operations, employees, and clients. It requires carefully choosing a successor and ensuring that the culture of the two firms can mesh.
Finsum: Succession planning is increasingly important for clients. Here are some of the most common types of succession plans.
- advisors
- clients
- wealth management
- succession planning
