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Financial Advisors: Maximizing Your Firm’s Value by Giving It Away

By ClientWise | January 24, 2013


“If you can get key staff to think and act like owners, some amazing things can happen.” …David Grau Jr.

David Grau Jr. is an industry-leading expert in the buying and selling of financial service practices, and the founder and CEO of Succession Resource Group. In a recent interview with ClientWise, David shared his subject matter expertise on a topic of growing interest for successful financial advisors: Succession Planning.

One of the dramatic trends that David has seen in recent years is how financial advisor businesses are bought and sold. Ten years ago, the options for sellers were pretty much twofold:

  • Sell your book, i.e. the roster of clients
  • Retire through natural attrition, i.e. doing nothing

Today, the options for sellers are significantly increased. Advisors looking to sell their business in today’s market have a host of interesting options for realizing their value, and ensuring their clients end up with the right succession scenario, and the right buyer. These options include:

  • Selling externally to a peer or fellow advisor

  • Selling to a bank for a roll-up company

  • Selling externally, on a piecemeal basis in a partial book sale, and stretch the period out for 3-10 years

  • Selling all-at-once to an internal buyer, e.g. a partner, junior partner, employee, or family member

  • Selling incrementally to an internal buyer

Due to the fact that buyers of financial advisory practices today are much more informed than in prior years, it is incumbent upon potential sellers that they begin their succession planning much farther in advance. However, from David’s experience, this hasn’t happened yet. He estimates that only 2-3% of owners of financial practices have a fully operational succession plan. A larger percentage, possibly 40% or so, have the talent in place or a junior partner in the wings, but they don’t have an actual plan in place equivalent to the type of plan that a financial advisor might deliver to a client, i.e. a formal, tangible plan as opposed to a concept or an idea.

How to Maximize the Seller’s Value

Generally, selling externally and selling internally lead down two slightly different pathways when it comes to maximizing the sale value of the firm. Another key factor is whether the firm is personally branded or not. (e.g. it is more difficult for clients to transition to a new external owner when the prior firm has a strong personal brand.)

Yet, there are some common characteristics that optimize the seller’s value:


  • More recurring revenue streams are best
  • Enhance overall profitability, including the principals reviewing the p/l statements on a frequent basis, e.g. quarterly
  • Ramp up technology
  • Give some of the equity ownership away to junior partners and/or key employees


This last strategy might seem counterintuitive. Yet from David Grau Jr's experience, it is this strategy that can have the greatest impact. “If you can get key staff to think and act like owners themselves, amazing things can happen. Long run, it really changes the dynamics of the firm.”

With the average age of financial advisors in the industry at around 55 years old, it is inevitable that succession planning will remain a hot topic for those successful financial advisors who are thinking and acting as the CEO’s of the firms. However, as Grau points out, it is critical that any succession plan not lose sight of the ultimate stakeholder, the client. “Values and deal structuring are always factors in a succession plan, but the real focus for most advisors is creating a plan that ensures their clients are well taken care of as they (the advisor) retires. Whether that plan is with an internal succession, or with a peer, the motivation is generally the same.”


[For more information on David Grau Jr. and his company, click here]


For additional observations on how financial advisors can build their wealth management enterprise, please download the ClientWise Learning Tool below:


8 Wealth Management enterprise

Topics: Business and Operations Management

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