Franklin Templeton Investments recently conducted a study on succession planning that included 162 RIA leaders with AUMs ranging from $100 million to $5 billion. Less than one third of them have started the process to ensure a successful transition to retirement. More than half feel that won’t affect the pool of potential buyers when they’re ready.

Financial professionals, relied upon by countless individuals and companies for sound financial planning, often fall short in that area when it comes to their own interests. Yes, the ratio of buyers to sellers is estimated at 50 to 1 right now, but that doesn’t mean you’ll get maximum value for your book of business. Successful succession requires careful planning.

Step #1: Establish a Timeline

Choosing to sell your practice on a whim when a buyer appears is not fair to your clients. If you’re thinking about moving on, establish a set timeline to do it in. A succession plan should be in place several years before your projected exit date. This gives the advisor time to refine and modify any established plans to sell or turn the business over internally.

Don’t live in fear of a lower valuation if you wait. Choose a multiplier for calculating the firm’s value and focus on growth in the remaining time you have left. A common mistake that many advisors make is “winding down” when they near the end of the road. That just decreases the asking price if you’re selling. You want the firm to be thriving when you make that deal.

Step #2: Set an Asking Price

The seller has all the leverage in the current environment. That doesn’t mean that you should be overly aggressive on the asking price. Buyers who overpay tend to fail quickly. That will leave your clients with a sense of betrayal that won’t be directed at the new owners. Don’t allow your life’s work to be tainted because you make a poor choice at the finish line.

Consult with someone who has experience in mergers and acquisitions in the financial services world. Get an accurate valuation for your firm today and for what your firm will look like when you get to your target date. If you want a higher asking price, bring more clients on board. Add value to what you’re offering to justify what you want when you walk away.

Step #3: Assess Internal Options

Succession doesn’t always need to be about selling your firm. Some senior financial advisors prefer to turn their practice over to a junior partner. This gives clients more continuity and eliminates the need to screen external buyers. Of course, you’ll need to have a qualified team inhouse to fill the roles of a successor. If not, bring start early and bring them on board.

Compensation in an internal succession typically comes in the form of continued revenue from the company after you’ve made your exit. This type of deal rarely involves a lump sum transaction, but it can provide a steady income during your golden years. That makes it worth considering. Make sure you have an attorney draw up the contract for you.

Step #4: Speak to an M&A Specialist

If you forego the internal succession route and want to find a buyer to acquire your company, speak to an M&A specialist with experience in financial advisory firm transactions. Bridgemark Strategies employs several people who can help you with this process. Our experience is that these things should never be done alone. We can find the right buyer and price for you.

M&A activity in our space is expected to increase dramatically in the next decade, so it’s not a bad idea to create a succession plan now, even if you’re not contemplating retirement at this moment. There may come a time when selling your firm is simply more profitable than maintaining it.

Step #5: Detach Yourself from the Process

This might be the most important step on this list. Advisors develop strong emotional attachments to their business and their clients. These emotions can get in the way when negotiating an acquisition. Many deals fall apart because the seller wants to alter the terms at the last minute or simply changes their mind about selling the firm.

Once you’ve made the decision, turn it over to the experts and let us do our job. Your part is to create the succession plan and execute the internal steps necessary to get you to your target exit date. You’ll want to do what’s right by your clients, but it’s important to separate out your emotions once you’ve decided to move on.

At Bridgemark Strategies, we are leading financial advisor recruiters and consultants serving Financial Advisors, RIAs, and Broker/Dealers nationwide. If you’re considering a transition or seeking help putting together a succession plan, we can leverage our vast network and experience to help you discover and vet new firms so you can make the best choice for your needs. Contact Us