In this issue we look at succession planning for advisors —an event that can either be a rewarding end to a principal’s career or a disappointing fade to black with little to no effort to pass the firm on, transition clients to younger advisors or monetize the business to leave behind a financial legacy. All things, surely, any financial advisor would try to help facilitate for their own clients who owned small businesses.
Part of the problem is that there are few clear options to get out of the business, at least in a way that is financially sound. That’s where Phillip Flakes and Nicholas Gudz come in. Industry consultants experienced in helping guide advisors through their transition, Flakes and Gudz saw a need for a more transparent process in the buying and selling of advisory firms, not the least of which is getting an unbiased valuation based on actual market activity. Industry brokers exist, of course, but like brokers anywhere, they charge a transaction fee, and both buyers and sellers need to do their due diligence to ensure the price is fair.
In May, Flakes (who penned our article on successful transitions on page 48) and Gudz launched Succession Link, an online listing service for financial advisory firms. It operates almost like Craig’s List, except instead of used bicycles and furniture, the items for sale are established books of business. There are other online listings out there but mostly from traditional brokerage services. In a twist on that model, here sellers pay nothing; there are no transaction fees, and buyers pay only a monthly fee for access to the list. “The transaction fees that sit in the middle of these deals often keep the advisors from selling,” Flakes says. “We want to be a true marketplace, to not be conflicted.”
Succession Link is only a few months old but claims to already have 38 listings for firms totaling $1.2 billion in AUM. The mix, according to the website, is about 65 percent commission-based practices. Like any new venture, success here is far from assured. Successful transitions usually take years of planning. Yet the vast majority of advisors are in danger of letting their practices wither on the vine as they age out; efforts toward making it easier to at least bring sellers and buyers together may fill a need.
There is an occupational hazard of editing a magazine for a group of professionals: Despite our best intentions, the editors (unlike our reporters and writers) often spend less time talking to our readers than we do talking to the product and service providers that want to get in front of them. Asset managers, clearing and custody firms, recruiters and consultants of all stripes, many with good information (like Flakes) and many with only a sales pitch, are all eager to bombard you with information and advice. We hope to be the filter, separating the good from the bad, but to do it, we need your help. We’ll reach out, and I hope you do too. Tell us what you want to see more of, both in REP. and at WealthManagement.com. Write to me at email@example.com.