Finding a Successor For Your Financial Advisory Practice

You spend decades building your practice. During that time, you cultivate and nurture strong relationships with your clients and your staff. With so much invested, you want to make sure that you find a worthy successor to carry the torch. Finding a worthy successor is a combination of knowing where to look for a possible candidate, how soon you need to start looking, and then knowing what to look for when vetting prospective successors.

Where To Look

You must first start by knowing where to find experienced advisors. You can begin by looking within your own broker dealer network. Your field leaders and colleagues can help connect you to younger advisors who may be looking to step into a leadership role starting as a Junior/Associate Advisor, or a senior advisor looking to expand their operations into a new region or to expand their existing market share in a specific client niche.

Although there are benefits to focusing within your broker dealer (which we will discuss later), you can also look outside your BD to advisors in your area. Many professional organizations that cater to financial advisors have local chapters that serve advisors from multiple firms. You can leverage these organizations to network with other advisors in your area.

The first two options are a very DIY approach and, although relatively inexpensive from a pure cost standpoint they can be very time consuming for a busy advisor with clients to care for. That’s why many advisors rely on a listing service or an M&A consultant to help them cast a broader net and handle the vetting process for prospective candidates. Not all practice sales solutions are created equal. Some practice listing services serve simply as a marketplace, almost like a Craig’s List, with little to no care taken to vet and filter prospective buyers. Others, like Advisor Legacy, take a more hands on approach and combine the market scope of a listing service with a white glove process for vetting and sourcing prospective successors. There is a fee for using these services, which often includes support for interviewing candidates, negotiating the deal, and transitioning the practice.

When To Start Looking

Many advisors wait until they are ready to retire to start looking for a successor. Many falsely assume the process will take a few months. The truth is it can take a while to find the right fit. Plus , you want to ensure a smooth and complete transition for your clients and staff. With that in mind, its best to give yourself a runway of at least one year to as much as 5-10 years to start working on your succession plan. Outside of planning for your ultimate exit, starting early will allow you to achieve other professional goals you may have. For example, y ou may want to bring on a successor earlier, so you can move into a more strategic role, helping to build certain practice initiatives such as COI relationships before you retire. Or you may want to move out of the leadership role and spend your remaining working years in a purely client service role. In either case, selling a few years before you plan to retire allows you to cash in while your practice equity is high, while still enjoying additional years of income and even additional equity building opportunities.

What To Look For In A Candidate

Deciding who will carry the torch of your Advisor Legacy is about more than finding the buyer willing to pay the right price. It’s about finding the right advisor to serve your clients and the right leader to lead your staff into the future. ​ In short, i t’s about finding the right “fit ,” both on the individual level and on the practice level . Personal Fit – Advisor to Advisor First, you want to make sure that you and your successor mesh on a personal level. This comes down to three things: shared values, similar personality/style, and the practice management and client service philosophy.

Shared Values
Do you and the successor deem the same things as important? Do you both value the same things?

Do you get along? Do you like the person? Do they have a similar style and personality that you clients and staff would quickly adjust to?

Practice and Client Service Philosophy
As leaders, do you have a similar philosophy and way of doing things in the practice?

Organizational Fit – Practice to Practice
Next, you want to determine how well the practices would fit together. A smooth transition relies heavily on the fact that the practices operate in similar ways. The similarities that matter most are culture, BD affiliation, investment approach, and the client composition.

Does each practice have a similar set of values, norms, and behaviors that they follow? Will the team members fit in and work well together?

BD Affiliation
Are you operating on the same platform, or one similar enough that it won’t significantly impact practice operations or client experience? Note – a successor does not have to be within your broker dealer. Sometimes the best candidate operates on another platform. There are extra steps to take to transition in these situations, but it can be done with minimal disruption.

Investment Approach
Do you have a similar investment approach? Would clients receive similar advice?

Client Composition
Do you serve the same target market or a similar/adjacent market? Do they understand your customers and their unique needs?

If you work with a succession expert, like Advisor Legacy, we will work with you to define what you’re looking for in an ideal successor and help you vet candidates. No matter who you decide to work with, it helps to get a third-party perspective. Not only can they help you clarify and articulate what you’re looking for, they can also help you see what really matters for fit, and what is an area you can be flexible on. Above all, i t’s important to determine your fit criteria before you start searching for a candidate, so you can better spot a good candidate early, and quickly eliminate bad fits before getting too deep into a deal.

Looking to Sell Your Practice?

Whether you’re planning ahead, looking for a buyer, or have a successor ready to go, we can help. Contact us to schedule a free 30-minute consultation.

About the Author: Todd Doherty

Todd Doherty serves as Vice President for Advisor Legacy, where he helps advisors navigate the entire M&A process from start to finish. With over 15 years of senior leadership experience in financial advisor firms, Doherty knows first-hand what it takes to grow a successful practice. His specialties include growing practice value, succession and acquisition strategy and planning, business valuation analysis, and operations. Doherty works closely with his team to help advisors make smart decisions and successfully execute practice sales and acquisitions.


Categories: Advisor Succession


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