Succession planning: It's not just about the value of your business

Jul 27, 2014 @ 4:44 pm

By Jeff Vivacqua

The challenges facing the financial advisor marketplace are becoming increasingly more evident and the graying of financial advisors seems to top that list; however, most advisors, broker-dealers, and custodians tend to focus on the surface issues around succession planning and are not addressing the root causes of the challenges facing the financial advisor marketplace today. Instead, there is too much focus on how to value a firm, when the attention should be on succession planning and the tactics to implement the ideal strategy for each specific advisor.

A good number of practice management coaches will say that financial advisors spend all their energy working “IN” their business with their clients' plans and goals, while various industry surveys suggest the majority of financial advisors spend little to no time working “ON” their business – and this is especially true regarding continuity and succession planning.

As an independent financial advisor, are you overlooking your biggest business asset and leaving it unprotected without a plan?

When you work with your clients, do you draw their focus to the first and most important step: defining their ideal retirement? We encourage you to take the same step with your business and define your ideal exit strategy. Consider the importance of your role in advising clients and focus on how to best ensure your business transcends from one generation to the next.

Can you protect your clients, business, and family by making time today to look at business continuity and succession planning from a different perspective?

At Cambridge, our approach to your succession planning begins by asking you to think about the following key questions:

1. Why are you in this business?

2. What are your goals in life?

3. Why does your business exist?

4. What kind of personal and professional life do you want today? Tomorrow?

If you are like many of the advisors I've spoken with, you are focused on your clients first. I frequently hear advisors say, “If I spend my time answering those questions about my retirement plans for the next 10, 20, or 30 years, it takes me away from spending time with my clients and business today.” What we like to point out to those advisors is that a business with a plan is worth far more to a buyer than one without, so let's get to work on future value.

To begin, let's assume you have been coached to conduct more fee-based and recurring revenue to annualize your revenue stream and annuitize your business. And, let's recognize how that builds up the future value of your firm. Next, let's think about your continuity plan, in terms of death and disability, as a preliminary step to a bigger plan. In this step, you need to assess how this plan impacts your business model today, and more importantly, in the future. You need to concentrate on protecting your biggest asset while providing benefits for your spouse, heirs, and estate. Sometimes the next generation advisor or advisors named in the death and disability plans can also be the basis for your succession and retirement plan, but they can be different if that makes the most sense for your plan. It is important to stress that a plan can be updated and changed at any time, and you are not locked into a choice you make today. Your continuity and succession plans can and do evolve over time with your business model. Planning how to increase the value of your firm is an important part of succession planning. And, a well thought out succession plan will increase the future value of your firm.

To think about succession planning in a different light, what would you do if you learned your broker-dealer or custodian had no succession plan to ensure the firm will be around to service your business and clients' needs long into the future? You might start thinking about switching to a firm with a solid plan that protects the interests of your clients and in turn the income stream for your business. What if your most important clients started asking the same question about your business and your succession plan?

It's time every financial advisor defined their ideal exit strategy to protect the future for your clients and business. Protect your business by accessing its current value and creating a plan to enhance it in the future. Step forward and build your customized business continuity plan with a focused strategy for building your unique retirement and succession plan.

Jeff Vivacqua is Senior Vice President of Business Strategy for Cambridge Investment Research, Inc.

With nearly 20 years of industry experience, Jeff Vivacqua has an active role in managing strategic issues for Cambridge Investment Research that affect rep-advisors including marketing, sales, operations, business development, and technology and is also responsible for developing strategic initiatives for Continuity Partners Group that address continuity, succession and acquisition needs for today's independent rep-advisors. He brings prior experience in advisor-based solutions from his leadership roles at Mutual Service Corporation (LPL), the AIG Advisor Group, SunAmerica Securities, and Charles Schwab. Vivacqua earned a BS in finance from Southern Illinois University and has certificates in Personal Financial Planning and Facilitative Leadership Training programs. He holds FINRA Series 4, 7, 24, 63, 66, and 79 licenses and is a member of the Financial Services Institute (FSI). 


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