Without You: How to Pass on Your Practice at Retirement

Without You: How to Pass on Your Practice at Retirement

Some call it a burgeoning crisis in the practice management industry.

Many professionals who own advisory firms are nearing retirement. These people form the bedrock of the industry, but just like terra firma, this seemingly solid foundation will occasionally shake. The shock can sweep both clients and employees away unless the owner plans effectively for the handover of power.

Cerulli Associates has studied the matter and made some disturbing findings. Around one-third of advisors who will retire within a decade have made no successions plans. This is troubling news for their clients, who likely assume there will be steady continuity in the business that shepherds their money. How did this situation come to pass?

One problem centers on a tendency to overvalue one’s business. After working a lifetime to build a practice, it is perhaps understandable that the owner places a high value on the company. Members of the firm who have an otherwise strong interest to purchase the company may baulk at the price. Similarly, potential outside buyers can remain at arm’s length.

The problem is this: the core clients of an advisory are usually of similar age to the principle owner – they are nearing retirement age, too. Potential buyers of the business will be considering a company that will shortly lose many of its most lucrative clients. This looming client-loss factor explains why firms in this position are not quite as valuable as their current EBITDA may indicate.

Acquiring a younger clientele means developing new technological approaches to business. This is necessarily expensive and time consuming when one considers the retraining involved for current staff. One effective approach is to seek a strategic partnership with a company that has both the vision and resources to help your company make the leap into managing the new generation of clients.

For more information, please read:
Is Succession Planning the Next Practice Management Crisis? | Wealth Management


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