This book is going to challenge you and everything you think you know about succession planning. For independent advisors, succession planning is quickly becoming the cornerstone to a strategic growth strategy designed to perpetuate their business and their income streams beyond their own lifetime, while providing a multi-generational service platform that attracts and rewards younger advisors. This makes succession planning one of the most, if not the most, important practice management tools in this industry today. As an independent financial advisor, now is the time to address the question of what will happen to your practice and your clients after you "exit the building." In most cases, the answers are right in front of you. Thankfully, Succession Planning for Financial Advisors: Building an Enduring Business has arrived to transform today's practices into businesses designed to endure and prosper and serve generations of clients. Learn how to create a "Lifestyle Succession Plan" that can provide a lifetime of income and benefits to the founder even as he/she gradually retires on the job Unlock the power of equity management -- the best planning and building tool an independent advisor owns Learn how to attract and retain the best of the next generation to help you build a great business and to support your succession plans and care for your clients and their families Determine precisely when to start a formal succession plan and related continuity plan so that your business can work for you when you need it most Understand why succession planning and selling your business are completely different strategies, but how they can complement each other when used correctly 95% of independent financial service professionals are one owner practices. To the positive, these practices are among the most valuable professional service models in America. But almost all advisors are assembling their practices using the wrong tools -- tools borrowed from historically successful, but vastly different models including wirehouses, broker-dealers, and even OSJ's and branch managers. Revenue sharing, commission splitting and other eat-what-you-kill compensation methods dominate the independent sector and virtually ensure that today's independent practices, if left unchanged, will not survive the end of their founder's career. It is time to change course and this book provides the map and the details to help you do just that. For independent practice owners and staff members, advisors who want to transition to independence, as well as accountants, attorneys, coaches and others involved in the financial services space, there are invaluable lessons to be learned from Succession Planning for Financial Advisors . Written by the leading succession planning expert in the financial services industry, former securities regulator, M&A specialist, and founder of the nationally recognized consulting and equity management firm, FP Transitions, David Grau Sr., JD, has created an unmatched resource that will have an enduring and resounding impact on an entire industry
Preface ix Acknowledgments xi Introduction xiii CHAPTER 1 The Succession Conundrum 1 Practices Built to Die 1 What Exactly Is a Succession Plan? 2 Why You Need to Create a Succession Plan Now 4 Your Clients Are Watching You! 8 Why This Industry Struggles with This Concept 9 The Evolution of the Solution 11 Mind Your Own Business 14 The Opportunity at Hand 16 CHAPTER 2 How to Start Creating Your Succession Plan 19 Defining Your Goals 19 Building a Foundation for Success 24 Facing Your Biggest Challenges 26 Equity--A Powerful Business-Building Tool 33 Valuing a Financial Services Practice 35 Practicing Equity Management 47 Building Profit-Driven Businesses 49 CHAPTER 3 Transforming Your Practice into a Business 51 Assessing What You Have Built 51 A Building Problem, Not a Planning Problem 55 A Parable 58 Building Your Ship 60 Rethinking Your Compensation System 61 Balancing Revenue Strength and Enterprise Strength 63 Selecting the Right Entity Structure 65 Remodeling Your Cash Flow 72 Production Model versus Business Model 77 CHAPTER 4 Creating Your Succession Team 81 The People Problem 81 The Secret Formula: G-1 + G-2 + G-3 82 Plan Before You Build and Hire 85 Mining the Talent Pool 87 Turning Employees into Equity Partners 89 Onboarding Talent with a Book of Business 91 The Case of the Super Producer 94 Help Wanted Ad 96 Solving the Talent Crisis in This Industry 98 A Conversation with the Next Generation 99 CHAPTER 5 The First Step--A Continuity Plan 103 A Dress Rehearsal for Succession Planning 103 What Exactly Is a Continuity Plan? 104 Basic Components of a Continuity Plan 105 Types of Agreements 106 Funding Your Continuity Plan 111 Continuity Plan Dos and Don'ts 112 A Powerful Acquisition Tool 115 Communicating Your Plan 115 CHAPTER 6 Charting Your Succession Course 117 Exit Strategies versus Succession Plans 117 Selling Your Practice 118 Mergers 124 What Doesn't Work in This Industry 126 Employee Stock Ownership Plans 129 What Does Work? A Lifestyle Succession Plan 132 Goals of a Lifestyle Succession Plan 134 The Family Business--A Special Case 136 "Yes, but ..." (Obstacles to Overcome) 139 CHAPTER 7 Succession Planning Step-by-Step 147 Where to Start 147 Assembling Your Support Team 150 Enjoy the Planning Process 152 Doing the Math 153 Establishing a Fair Price 154 The Nuts and Bolts of a Plan 155 Documentation 166 Bank Financing--Expanding Your Options 167 Beware of Benchmarks and Survey Results 169 CHAPTER 8 A Tale of Ownership 171 Succession Planning Case Study 171 CHAPTER 9 Course Corrections 179 Returning to the Harbor 179 Empowering the Next Generation 180 Growth Is a Sign That Your Plan Is Working 182 What to Do When Your Plans Change 183 What to Do When Their Plans Change 184 Handling the Culture Shift 185 Conclusion 187 About the Companion Website 189 About the Author 191 Index 193
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