In an effort to give smaller RIAs access to a broader array of services, Ron Carson has launched Carson Institutional Advisory. The new platform includes a succession planning strategy as an added attraction.

Carson, a high-profile wealth manager in Omaha, introduced CIA to provide independent advisors with access to a customized suite of services that allows advisors to focus on building their businesses and serving clients with enhanced transparency, timely communications, and process-driven investment strategies.

What type of advisor is most likely to sign up? "Not newcomers to the business," Carson said. "We may attract some relatively small firms and some fairly large offices. For us, though, the 'sweet spot' probably will be advisors with about $200 million-$300 million under management. These advisors are sizable yet they probably don't have all the resources that much larger firms have."

Among the main needs of such advisors, Carson said, is a viable succession plan. They may have a valuable business but might not have a way to realize that equity. "This is a crisis in our industry," Carson said. "If you ignore verbal agreements and those written on a napkin, there are less than 10% of advisors with an executed, documented succession plan."

CIA, therefore, offers a advisors a way to "establish a succession solution" by joining the new venture. "In the short-term," Carson said, "Carson Wealth Management will manage their assets, if they are unable to do so. Clients have a right to know there won't be an interruption if something happens to their advisor."

Once an advisor has been in this CIA for two years, he or she will be offered a formal buy-sell agreement. "We will provide a cash payout over time," Carson said. "Each agreement will be underwritten on a case-by-case basis. Generally, the buyout price will be a multiple of EBOC (earnings before owner's compensation). That multiple will be determined by several factors, such as whether the seller will remain active in the business or will need to be replaced."

Carson sees the initial two-year period as a time for both parties to become comfortable with each other. "We think our advisors' earnings will increase," he said, "so their practice will have a higher selling price. The agreements will cover death, disability, and retirement; we'll also offer the chance for a partial sale, so the advisor can take a few chips off the table."

Many advisory firms have scant value now, Carson said. "They'd probably have to settle for an earn-out, if they wanted to sell their business. With our system, they'll be able to rely on us for the middle- and back-office functions that they might not enjoy doing. Then they can concentrate on adding value to their business."

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access