A Tale of Two Advisors
DEAR ADVISORS,
As we live our lives, some decisions are made for us, but your exit plan should NOT be one of those things! The beauty of exit planning is in being prepared to find the right buyer at the right price. There are three players in every exit strategy - the buyer, the seller, and the sales price. It’s quite rare for the buyer and seller to be ready at the same time, and agree on the sales price. Usually, one of those three must compromise for the deal to go through successfully. I wanted to share the following real-life stories, comparing the exits of two advisors, to illustrate the value of being prepared to exit at any moment.
Prioritizing the right buyer at the right price - The first advisor, we’ll call her “Ready” Rhonda, was excited to share her story about exiting her firm successfully. She had a small, solo advisory firm, and had trained a series of paraplanners and associate advisors over the years. The last advisor she trained got along so well with her clients, and was so intuitive to work with, that Rhonda brought up the idea of an internal succession plan. The associate was open to it, and they continued to work together for several years. The timeline they had agreed upon changed, when the associate came to Rhonda and explained some new ideas for the firm, and suggested pushing the timeline forward by a few years. Rhonda didn’t feel like she was quite ready to retire, but she saw that the associate was ready, and knew that it was a good fit for her clients. Rhonda agreed, and they completed the internal succession plan a few years earlier than planned. However, Rhonda wanted to continue doing meaningful work in retirement, so she started doing some consulting to help other advisors in her community figure out their own succession plan as successfully as Rhonda had done. Rhonda said she was happy and wouldn’t have done anything differently.
Prioritizing the seller’s timeline and the sales price - The second advisor, we’ll call him “Prideful” Paul, was excited to share his story as well, even though he hadn’t successfully retired yet. Paul also owned a solo advisory firm, and had trained many advisors throughout his career. About 10 years ago, he found one advisor who was easy to communicate with, and took great care of his clients. They also discussed an internal succession plan, and worked towards that for several years. As time passed, Paul felt like he just wasn’t ready to retire, so he terminated the exit plan and let the associate go. Today, Paul is ready to retire, but he doesn’t have an associate advisor who’s ready and willing to work on an internal succession plan. Paul is talking with some bigger firms, who specialize in acquiring smaller advisory firms, but they won’t provide the same services and level of care that his clients are used to receiving. Unfortunately, Paul doesn’t have much of a choice, and time is running out. Paul still felt like he made the right decision 10 years ago, but I couldn’t help but feel that he was a little jealous of Rhonda’s success story.
As more advisors shared their experiences with me, I see how each advisor’s exit plan is truly shaped by their personal value system. Valuing a high sales price is not wrong, it simply narrows your search to only the firms who can afford to buy you out. Valuing your independence and your timeline isn’t wrong; it may mean that an internal succession plan over several years isn’t the right fit for you. It’s all part of your unique path to secure the future of your family and your financial advisory firm.
Warm regards,
Brooklyn
P.S.
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