How advisers can become small business exit planning specialists

Now that we have entered a fiduciary era, it’s pretty clear that the most successful financial advisers will focus on creating an advice-centric experience for clients, as opposed to a transactional relationship that emphasizes product sales. Central to an advice-centric experience model is an adviser’s willingness to dive deep and gain a full appreciation of their clients’ needs. It’s an approach that should unearth a new growth opportunity for advisers: becoming a small business exit planning specialist.

While successful small business owners have long been a desired client segment among most advisers, the aging of the baby boomer population is creating a new need for business exit planning expertise. According to the Business Enterprise Institute (BEI), 79% of small business owners say they want to exit in the next 10 years, while 72% say that with adequate financial security they’d do it immediately.

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Even so, relatively few advisers have acquired the skills necessary to provide expert-level exit planning services to business owners, even as the new fiduciary landscape — in which best-interest advice is the expectation among most clients — is making such offerings more relevant than ever.

Here are three steps advisers can take to better position themselves as business exit planning strategists:

1. Start each business exit planning process with a detailed review of personal as well as professional financial planning goals.

The first step in the years-long exit planning process is to fortify a business owner client’s personal and professional financial plans. This includes making sure they have the right forms of business insurance in place — including liability, key-man or business continuity policies — and that those policies dovetail with personal financial needs. Well ahead of a sale, it’s also important to discuss the pros and cons of setting up a 401(k) or a pension plan. For a small business with a collection of longtime salaried employees, these vehicles are potentially a way for current and prospective owners (plan sponsorship can change hands, too) to both retain high-quality talent — which could increase the value of the business — and defer a significant portion of their income.

2. Obtain the right credentials.

Any adviser can try to present themselves as a business exit planning specialist, given that they comply with their broker-dealer’s outside business activity policies and other relevant guidelines. But to gain credibility with current and potential clients — as well as the broader business community — it’s essential to acquire a designation from a credible authority demonstrating that expertise. Two examples of such credentials are the BEI (Certified Exit Planner – CExP) and the Exit Planning Institute (Certified Exit Planning Advisor – CEPA). Both program platforms offer continuing education courses that can help advisers learn more about the unique process of helping business owners prepare for a sale.

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3. Build your experience base by beginning as a local business broker.

In months leading up to the sale, advisers should begin implementing the final steps to maximize value. This includes everything from identifying indispensable employees, tackling debt and eliminating unnecessary expenses, but also the very important process of conducting a business valuation, finding well-qualified partners and enlisting the help of outside experts to structure deal terms that best align with the sellers’ long-term financial goals. No doubt, it will take time to build experience as an exit-plan specialist. But as advisers successfully prep more and more clients for a liquidity event, they will begin to gain a reputation for being a business broker within their community, a lever they can use to further grow their practices.

With financial services now having entered a fiduciary era, it’s incumbent on financial advisers to create value and distinguish themselves in ways that are rooted in a deeper understanding of their clients’ needs. Given the number of small business owners in this country — many of whom continue to be underserved by our industry — becoming a business exit planning specialist is one potential avenue to do that.

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Rich Whitworth is managing director of business consulting at Cetera.