The statistics are depressingly familiar. Tiburon Strategic Advisors finds half of advisors over the age of 50 intend to sell their businesses upon retirement. While you might be wondering what the other half plan on doing, consider that only 29% of independent advisors have written succession plans.
It isn’t as if the advisor profession is without prospects. Employment in the field is expected to grow “much faster than the average for all occupations,” according to the Bureau of Labor Statistics. For the 10-year period between 2008 and 2018, the advisor profession is projected to grow by 30% as more baby boomers retire. What many advisors have spent a lifetime building clearly has value, and a defined exit strategy is the best (and usually only) method for ensuring its proper extraction.
Yet when it comes to succession planning, the cobbler’s children have no shoes. Kim Nourie of San Antonio-based Cross Financial Services would be the first to say statistics rarely motivate people to act. Personal experience, of the kind Nourie recently experienced, will light the proverbial fire much quicker—provided it isn’t too late.
“About a year after I joined my father’s firm, he was diagnosed with kidney cancer,” she says. “We had a very positive outcome, but it taught us how fast things can happen.”
Advisors are aging, boomers are retiring and more independent broker-dealers and RIAs are stepping up to help retain value, as well as client confidence, in their affiliated firms.
The level of support the advisor receives, of course, depends on the size of the organization, whether it be an independent broker-dealer or a large registered investment advisory firm.
Two organizations in particular, Scottsdale, Ariz.-based United Planners Financial Services and Aspiriant, a California-based RIA, stand out in their respective channels when assisting advisors in the development of a plan. A review of what each firm offers is a benchmark for other advisors involved in the succession planning process.
Service and Support
“My father and I had always talked about partnering up in the business,” Nourie, (left), says. “I’d been in corporate America and throughout my career we would periodically talk. Eventually he said, ‘You would just love this business.’ So I came on board.”
Nourie’s father was already with United Planners and was, for the most part, a sole practitioner. About a year after she joined, she says, it became apparent she was his succession plan.
“From day one we would meet with clients and they were thrilled,” she reveals. “So many of them said to my father, ‘We always wondered if something happened to you, what would happen to our account; who would take care of us?’ We realized early on that clients were thinking about it, even if they weren’t saying they were thinking about it. If we asked our clients to plan, we needed to show them that we plan as well.”
The epiphany led Nourie to the next logical step; what if something was to now happen to her? Her father was in a phase of his career where it would be difficult to step back in. So she made use of what any smart advisor should in a similar situation: her broker-dealer and professional networks. Through her local chapter of the FPA, she met her “new succession plan.” Her partner, Kirk Francis, had his own book of business and a small practice. He, too, had been thinking of his succession plan, and they spent over a year talking about teaming up to start a larger practice.
“In addition to a succession plan, we really wanted to work together to utilize the strengths and weaknesses that each of us has in order to build a better practice, always with the manner in which we treat our client as the end in mind,” she says.
But as anyone who’s done it knows, joining forces isn’t easy—and at times awkward. Nourie says the start of discussions meant they had to open up and be honest; profit and loss statements, revenue and expenses, all were on the table. They went line by line through each other’s books and examined where each spent money. After a year, they felt good about each other as people, she says, with similar values, goals and objectives for their clients.
“When you affiliate with United Planners, you typically become a limited partner,” she explains. “We spoke with them about lessons learned from other advisors throughout the company in our same situation. We wanted to understand the best methods for making the business flow in the way we wanted. They were very willing to take the time to sit down and help ease us through it.”
[Read more about broker-dealers' thoughts on succession planning.]
Recognizing that advisors have different needs and experiences, United Planners currently offers three levels of involvement when assisting in succession planning—platinum, gold and silver.
“The silver level makes heavy use of our internal intranet,” states Sheila Cuffari-Agasi, the firm’s vice president of partner development. “There are three sections on our Connectup platform dedicated to the subject and all are distinctly different. You can find information on straight succession planning or selling your practice, on buying a practice or on building out your branch location with key people.”