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Business structure, valuation, planning and documentation are important. 


According to a recent article1 in Investment News, many advisors are expecting to sell their business to fund their retirement, yet they aren’t properly prepared to do so. While most have become successful because of their own hard work, training and skills, financial advisors aren’t necessarily knowledgeable when it comes to entrepreneurial business issues. (This isn’t much different than the typical doctor, lawyer or dentist.)


As Investment News put it:


The difference between a practice and a business, which is worth three to five times more than a practice, is that with a business, the principals can walk away for an extended period of time without any major disruptions or client issues. Practices rely too much on the principals to either run the business, service clients or generate new business. Practices are usually named after the principals.1


It’s helpful to work with a checklist, like the one they provided:


  • Determine when or if I want to retire.
  • Determine whether retirement means working less, or not at all, in this field.
  • Create a decision tree.
  • If I want to sell, list potential buyers.
  • If I want to pass business to employees or partners, set up a plan like an ESOP.
  • Start conversations with partners in my firm about transitioning out.
  • Start grooming or hiring potential successors within my firm.
  • Create plan to buy other firms.
  • Partner with or join noncompeting firms (wealth/benefits firms, etc.).
  • Buy out or sell to current partners.
  • Create quick buy-sell agreement.
  • Gauge what percentage of clients would leave if I retired or sold the practice.
  • Create P&L/financial statement.
  • Determine drivers of valuation. Determine whether drivers of valuation differ by potential buyer.
  • Refocus business and staff on drivers of valuation.
  • Review client base to determine value of each.
  • Establish value of new clients as part of pricing exercise.
  • Find out valuations of firms like mine.*
  • Change name of firm to remove my name.
  • Determine whether business is viable without me.
  • Hire outsourced CFO or adviser.
  • Create an estate plan.


*Value is in the eye of the buyer… Beyond healthy growth, profits and cash flow, advisers need to determine the drivers of these basic metrics. For example, which clients are actually profitable and generate additional business? Which employees are really contributing? What investments in systems, technology and infrastructure are actually paying off?


Repeatable processes and systems are critical.


Investment News asks:


“Is there a written and repeatable system (an operating manual) to keep your business successful after you exit, through sustainable business operations, technology and, most importantly, people? Is the business well-positioned for the future given regulatory changes or basic economic trends? Basics, such as buy-sell agreements with partners, need to be created, as well as an estate plan and possibly an employee stock ownership plan (ESOP), depending on the decisions made.”


The article makes the point that the most important decision you can make is the one that you most often preach to your prospects and clients. That is, hire a professional to help you.


Quantum can help.


Quantum has teamed up with one of the financial industry’s leading experts to help our financial advisors conquer their practice management issues, including succession planning. Contact us to find out exactly what is available to you through your partnership.





These materials are for informational and educational purposes and are not designed, nor intended, to be applicable to any person’s individual circumstances.  It should not be considered as investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. The Quantum Group, and its affiliates, have a financial interest in the sale of their products.





1 InvestmentNews “Retirement plan advisers need to start planning for their own succession.” (accessed December 12, 2018).

Further reading:

Succession Planning for Financial Advisors: Building an Enduring Business, by David Grau Sr.

A Road Map for Selling a Closely Held Business: Part 1, by David Thayne Leibell, Carrie J. Larson, Brian Schimpf