Private Advisor Group Launches Advisor Protection Program

Firm will pay death benefit to advisors’ families and find a new advisor to take on clients

Private Advisor Group is launching a program to provide advisors’ families double their trailing 12-month advisory revenue in the event of their death.

“Our firm, Private Advisor Group, is going to take on the risk,” Pat Sullivan, managing director of Private Advisor Group, told ThinkAdvisor on Wednesday. “We will pay two times their trailing-12 advisory fee business, and we’ll pay that over the next four years. It doesn’t matter how many assets stay with the firm, the advisor and his family will get that two times the trailing-12 advisory business.”

In addition to the benefits paid to advisors who sign a formal buy-sell agreement with Private Advisor Group, the firm will find a new advisor to take on the deceased’s clients.

“Succession planning is something that’s important to advisors, and we find that still only 10% of our advisors have a formal succession plan,” Sullivan said. “We feel that they’ve done a great job of building up their business and working with their clients, but we feel like there’s a hole out there. If something happens to them, they’re not getting value for what they’ve built up, and their clients potentially don’t have a great advisor to work with.”

There are 450 advisors in the Private Advisor Group network. If an appropriate match can’t be found within the same firm, any advisor with a similar philosophy in the network could be selected to inherit the deceased advisor’s clients.

“We think this is kind of above where the industry is,” Sullivan added. “If somebody were to retire today, the industry standard is two and a half times their recurring revenue. We think this is a great way for an advisor to leave that legacy for his family, but it also should attract advisors to want to find a solution and come to Private Advisor Group because we’re paying above what the industry multiple would be.

“We have advisors who express interest in buying other advisors’ practices, but there are many more potential buyers than sellers. By being part of the Private Advisor Group network, when these situations occur, they will be presented to our advisors.”

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