Why advisor succession isn't just an exit event

Only a few months after his advisor succession-planning platform officially struck a partnership with Raymond James Financial, whose independent network of advisors in the U.S. represents nearly US$1 trillion in AUM altogether, Roland Chan is excited to say the least.

“It’s been great. There’s been a tremendous amount of excitement around Practice Exchange by FAs throughout the country,” says the founder and CEO of FindBob. “We’ve onboarded thousands of users that are wanting to address their growth or succession-oriented goals, and they’re extremely active.”

According to Chan, users of the platform initially look at resources that further their education on transition topics. They also utilize financing calculators, as well as modules that give an indication of the value of their books of business and help with installing catastrophic plans.

Those tools are the initial draw for many advisors, but what truly captures and makes them stay is the network. Succession-oriented financial advisors are actively using the platform’s Deal Room technology to define their selling goals, and go to market to find buyers. Beyond M&A, he said financial advisors still seeking organic growth use it to connect and pursue teaming and partnership opportunities, which Chan argues is the antidote to the industry’s succession planning problem.

“For the Raymond Jaymes home office folks, [the Practice Exchange] has led to unearthing billions of dollars in AUM, and zooming in to support those advisors that need their help the most,” Chan says.

He notes that for many organizations like Raymond James, this type of development doesn’t happen overnight; rather, it’s the culmination of years of investment in formalizing processes. “What FindBob affords those organizations is the ability to scale to help more advisors and have a greater impact on influencing succession behaviour,” Chan says.

Around the beginning of the global pandemic, many investment dealers and wealth firms saw a surge in interest around the topic of succession planning from their advisor partners. As business owners, most of whom are sole proprietors, financial advisors were hammered by the same COVID-related shocks and disruptions as other entrepreneurs throughout North America, which provoked much soul-searching and serious thought about future-proofing their business.

Around that time, activity on the FindBob platform also spiked, Chan says. “Not only did we see a surge in new users on the sell-side, we also have seen many advisors previously on the buy-side indicate they were actually now interested in selling all or a portion of their business. Perhaps most importantly, we’ve seen a significant increase in both succession and catastrophic planning activity.”

Many advisor sellers south of the border also want to get ahead of possible changes to the capital gains tax rate, which threaten to lead to a higher future tax bill later on. On the insurance side, he said the vast majority of buyers are private equity players, and seller advisors are eager to pass their book on to like-minded fellow professionals whom they know can provide the same quality of care to their clients.

“All of this signals the importance of our mission: to help encourage better in-network transitions,” Chan says. “Our goal isn’t just to help enterprises protect against attrition, but to also ensure that we’re not disrupting consumers and upholding our fiduciary obligation to them.”

Chan encourages all financial advisors and wealth professionals to start their succession planning early. Those who found their own practices, he says, must understand what they need their business to do not just for themselves, but also their loved ones, their staff, and their clients. That means not just thinking of succession as an exit event, but also an opportunity to build an enduring enterprise that can potentially create a lifetime of income.

“It sounds cliche but advisors need to first start with their goals,” he says, noting how too many sellers enter negotiations fixated on price and valuations, only for talks to stall later over other issues. Some questions advisors need to ponder before going to the table are:

• How will your clients be served?
• What will happen to your staff?
• How will the business be managed?
• When do you want to physically exit the business?

“Once you’ve defined these goals, you’ll now be in a better position to work on your sales strategy, like your non-negotiables, determining value, and articulating your strengths and weaknesses,” Chan says.