A succession-planning venture from Cambridge Investment Research, which has been in the works for a few years, now has a name: Continuity Partners Group.

As part of the new venture, 23 advisory firms in the Fairfield, Iowa broker-dealer’s network will be able to take out loans from Continuity in order to buy out other firms. It also gives junior advisors funding to buy out practices from senior advisors. Cambridge will provide funds by selling stakes in Continuity, in exchange for 20% of an advisory firm’s annual earnings. Details of the new venture were first reported by Investment News, but Eric Schwartz, chief executive officer of Cambridge, spoke to Financial Planning about the endeavor in the January issue of FP. 

Although the plan was supposed to be launched on Monday, a “legal complication” has delayed the announcement, according to a Cambridge spokeswoman.

“Now that the market has steadied somewhat advisors are going back to the big concerns they’ve had for the past five years,” Schwartz said in the interview. “One would be continuity and succession planning for their practices. No broker-dealer has really been able to build a comprehensive model for that.”

Succession planning and continuity planning for advisors is as significant for younger advisors as it is for those planning to retire. For every seller there has to be a buyer. So Schwartz thought about this question: How do these 40-year-olds have enough money to buy these 60-year-olds out when the purchase price is $4 million or $9 million?

“As we move out of the recession there is a lot of interest in this,” Schwartz said. “Especially because a lot of the older advisors might be tired now, looking to retire earlier. It hasn’t been much fun over the last five or 10 years. There are still a considerable number of 60-year-old advisors who want to work longer but there are also a growing number in the other category.”

The biggest problem is financing. Because it costs so much money to fund a buyout, broker-dealers have only been able to provide a “patchwork quilt” to assist reps in this transaction, Schwartz added. So Cambridge wanted to support their advisors in transitioning their practices, acquiring practices and provide a lion’s share of the financing without being dependent on cash flow from the broker-dealer, which has always been a limiting factor before.

“Not that the broker-dealer couldn’t help but when there’s a 90% payout you can’t be writing multiple checks at that magnitude,” Schwartz said.

Schwartz, who pioneered the fee-based advisory business model, began thinking about the endeavor three years ago. At the time, he thought about it in the same historical terms with which people today look at his involvement in the fee-based development.

 “In other words, what’s going to be that thing that we will look back on 15 years from now as something that could have grown your company a hundred fold if you had jumped on it at the right time,” Schwartz said.



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