If you have been thinking about exiting the industry as a financial advisor lately, whether that transition is one year or five years away in your mind, there are three main considerations you should be aware of. The earlier you start to think about each of these key areas, the better prepared you will be to transition your practice and the higher the value a successor will place on that practice.
- Finding a Successor
Many advisors ignore this key step until late in the game, but it’s really an area you should start thinking about early. Finding the right advisor to purchase your practice and take over your client base can take time. Sometimes, it may even take a couple of trials before finding the right fit. When looking for a successor, consider how you currently work with your clients and try to find an advisor whose philosophy mirrors yours as closely as possible. It’s also important to find a successor who has a good number of years left in their own career, to avoid having your clients change hands too frequently. If you can begin introducing your clients to your successor well in advance of your exit, it will help put their minds at ease about your departure.
- Structuring the Sale
Explore the various methods to structuring the sale of a practice and decide how you would ultimately like to receive payment on your book of business. Not all potential successors will have the ability to pay you in your desired structure. It’s important that you consider both areas well in advance of formalizing your succession plan. For more information on the various methods to structure the sale of your practice, visit our “Acquisitions” page.
- Creating a Transition & Marketing Plan
You should never go into your transition out of the industry without a written plan in place between you and your successor. It’s important to know exactly what to expect in the months leading up to your exit, AND in the months that follow. A well-executed transition will keep your clients comfortable with how their finances are being handled. Proper preparation will not only increase the chances of your clients staying with the acquiring advisor, but it will also ease the burden of transitioning the client accounts. By freeing up the advisor and their staff’s time, they are likely to pay more for the book of business.
If an exit from the industry is on your mind, we would be happy to discuss these three key considerations with you, or any other concerns you may have. Simply email explore@fppathways.com or call 248-663-4776 to set up a confidential discussion.