While the average age of an RIA is 54 years, 60% don’t have a succession plan. TD Ameritrade finds that RIAs understandably are busy building their businesses.
But it doesn’t take more than a few war stories to highlight the importance of planning, documenting and implementing a succession plan. Take the unfortunate case of an adviser who had just a handshake deal, until that adviser began suffering from a terminal illness, and the buyer backed out. Or the poor adviser who suffered a heart attack.
What advisers need to realize is that a seller needs to plan from a position of strength, not weakness. Buyers will discount the business value plenty absent exigent circumstances; don’t add to that de-valuation by including an element of desperation.
An effective succession plan can involve a lengthy term (for example, we have implemented five year buy-ins for internal successions). By planning now, in an effective manner, advisers can lock in their business value and rest comfortably knowing that they and their clients will be taken care of.
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