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5 Steps when selling your firm to a junior advisor

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As a financial advisor, you spend considerable time helping clients plan for retirement. You may even have discussed with some clients how they will transition out of a family business to let a successor continue what they have so carefully built.

Your business deserves the same thoughtful approach to succession. Taking a proactive approach helps you control the process and determine the best fit for your practice as well as your personal transition.

If you are like many advisors, you may have decided that mentoring a junior associate to grow into and acquire your practice is the best option. Who better to succeed you and serve as a future internal buyer than one you have handpicked, someone who understands the hard work you put into the practice?


Structuring and negotiating the succession plan can be an emotionally charged process for all parties, but for you as the business owner, it is a once-in-a-lifetime event involving significant business and personal changes.

The emotional ties that owners feel can make the question, “What is your business is worth?” even more complicated.

This is where succession planning can help. By knowing early in the process what constitutes “value” and “worth” for you and for your successor, you have the time necessary to adjust your business accordingly.


For your junior advisor, the opportunity to grow into the business as well as build the business may create a conflict when it comes time for the potential transition. This advisor wants to build a meaningful career path toward business ownership and long-term revenue generation.

However, a more successful business may also mean a higher price tag when the time comes for transition. If the goal is to have the handpicked junior advisor succeed the founder so that the practice can continue, the “sweat equity” that advisor has put into the business should be taken into account when structuring the buyout deal.

In addition, issues of sharing control and workload balance may surface as the two of you deepen the relationship and work toward ownership transition via the succession plan.

For example, your plan may call for transition of 40% of the business over the next five years and for you to maintain a majority of the ownership until such time as you are ready to transition out. If the plan and those targets, along with related workload duties, aren't carefully detailed ahead of time, a junior associate who owns 10% of the business could generate 60% of the revenue, which would make for a very rocky transition.


So how do you bridge the transition gap, making the expected succession plan happen?

Consider the following five steps as you and your successor move closer to a shift in control:

  • Clearly define the path to ownership. This can be done through a buy/sell agreement, but you can also define goals through a partnership track that outlines the hurdles that the junior associate must clear to attain partnership in the practice.
  • Establish a clear timeline for transition and ownership. This should include responsibilities such as marketing and management. This is a critical component of most succession plans.
  • Break the transition down. There are three main areas of transition: clients, management and ownership.
  • Include mentoring in the plan. Plan to pass on important knowledge about the industry, clients and business operations to the next generation.
  • Consult with a practice transition specialist. This external resource can work with you and your junior associate to define roles and handle control issues that may surface as your successor steps into the business.

Remember, transitioning your business to a successor isn’t an easy, straightforward process. But if you make a careful plan and follow its details, the continuing discussions surrounding the succession and the succession itself can proceed smoothly.
Matt Matrisian is senior vice president and director of practice management at AssetMark.

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