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The Dawn of a New Opportunity for Smaller Firms


The Dawn of a New Opportunity for Smaller Firms

Advisors in regional, boutique and other smaller firms are left to ride off into the sunset without a map to guide them

“While the wirehouses have solved for succession planning by offering advisors exit strategies allowing them to monetize their life’s work, most smaller firms have yet to put something formal in place.” 

— An astute observation recently posted by our own Deborah Aronson on LinkedIn.

Many advisors seated at regionals, boutiques and other smaller firms have been experiencing a painful “Ah-Ha” moment: “I’ve built an amazing business here, and now I want to consider a succession strategy, but my firm isn’t offering any options.”

For sure, these advisors built their businesses in firms where they thrived on a culture that offered greater freedom and flexibility. Yet now they are finding that they’ve hit what’s looking to be an insurmountable wall: Most of these smaller firms offer no clear path to succession. And the advisors are feeling like there may be no other acceptable solution but to abandon ship.

No Principals to Guide Them

It’s fairly clear that firm management who choose to take a laissez-faire approach to advisor succession planning are missing the boat. It says to those advisors who are looking for a formal and structured plan, “You are free to broker a deal with an advisor at our firm and structure it any way you like.”

That seems tone deaf, as most advisors have no idea what their businesses are worth, how a deal should be structured, or how to identify the appropriate successor. Leaving succession planning to chance, in most cases, is as good as not having a plan at all—which flies in the face of the tenets by which any principal focused on sustainable growth runs a business.

Related: Do the Economics of a Move to Independence Really Add Up?

Every Sunset is an Opportunity

Advisors on the back nine of their careers may choose to go to another firm, allowing them to move once and monetize twice. And, for those with entrepreneurial DNA, the leap to independence offers the flexibility and freedom to sell the business on the open market, creating true optionality, and ultimately garnering the most competitive bid for it.

The sad part about this is that often the advisor – and his clients – may be best served by staying put. We’ve had the opportunity to counsel many advisors in this very predicament. Happy enough with the culture and overall value propositions of their firms, these folks look forward to working maybe another 5-10 years. But without a next gen partner or other natural successor in place, they feel scared and rudderless.

In reality, the vacuum created by the lack of support in this area from their own firm’s management is being filled by a panoply of options elsewhere: Every brokerage firm in town and every independent firm in the country would love to be the acquirer of that business. Plus, these potential acquirers are offering oodles of money, attractive deal structures, and specific, like-minded, capable and hungry successors.

That said, it’s incumbent upon firms to recognize the challenge – and opportunity – that’s before them. And to do so before advisors see the dawn of a new opportunity elsewhere.

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