Advisors: That 40-Year-Old Successor, Like the Unicorn, Does Not Exist!

Jul 12, 2018


Throughout the year, I meet with so many advisors – a lot of whom have the same challenges and similar win stories – so the conversations sometimes can be repetitive. I talk a lot about creating personas, segmentation exercises, workflows and content marketing. Sometimes I forget, and repeat my examples to the same advisor multiple times. The benefit, of course, is that the more I hear about a particular problem or issue, the more I know I should put resources toward it. I can also share what I have learned from some best practices with specific examples so everybody can win.

The downside of the repetitive conversations is hearing of shared misconceptions. Then I have to be the bearer of bad news. I am the wet blanket to a number of advisors’ business or marketing plans and often the bad news is around succession planning. One of the more frequent conversations starts with an aging advisor lamenting that if only he/she could find a fortysomething advisor. That person would enter the practice, support the aging client base with outdated technology and processes, and allow the advisor to cut back but still earn a nice living. He/she would ultimately buy out the practice at some high multiple. Oh, and by the way, that 40-year-old has to have a big enough book today to pay for him/herself starting day one.

Why it does not work

Last month I had dinner with Dave (not his real name) who is an advisor in Florida. Dave is in his early forties has been in business for about 15 years, (independent for the last 7) and has about $60 million in fee based AUM. I told Dave about these repetitive conversations; advisors who looking for people just like him. He’s already been approached a few times and his answer is similar to mine, “Why the @#@! would I want to join your firm?”  He says sometimes he views it as an insult.

I don’t take it as an insult, but we did discuss why it doesn’t work for him or for others in his situation.

  • He already owns his firm:  Dave went independent for a reason; he wants to be the boss. The offers he received were for him to be junior to someone else. He is not taking a step backward. Since is he already “paying for himself” he doesn’t see a reason to change.
  • He doesn’t want a majority of your clients:  Many of the succession conversations are with advisors who are on the downside of their career. The book is aging and either just beginning or already in the drawdown stages. He doesn’t want to manage a depleting asset base.
  • He doesn’t want to inherit your old technology, systems and staff issues:  He wants to innovate, adapt and create.  He is proud of what he has built so far. His future is 20/25 years out (not 3 to 5) and it’s bright.
  • He already has a brand:  He doesn’t need a legacy brand. He focused on a niche and on servicing that niche. He is continually building his brand and doesn’t want to adopt yours.
  • He is not in a hurry:  Many of these advisors need to put a succession plan in pace soon. Dave can be choosey and take his time to make the right business decisions. He can wait you out and pick away some of your better clients.

Bottom line, you need him more than he needs you and he knows it.

#Advisors: That 40-year-old successor, like the unicorn, does not exist! Click To Tweet

Better positioning

Understanding that the Daves of the world are in a better negotiating position is the first step to finding a solution to an advisor’s succession issue. While you should be proud of your business, the reality is that there are a lot more of you than him so it is a buyer’s market. Change your mindset, instead of thinking as the seller, think as the buyer. What would interest him/her?

  • Maybe it makes more sense to discuss being acquired rather than being the founder or the leader. Put the pride away, what makes better business sense for the future?
  • Instead of painting the picture of you sailing off on vacation and short weeks, discuss separate clients but shared resources and processes to create economies of scale. Leverage is a good business decision.
  • Take a deep look at your business, is it growing? Are you continually trying to add value to your clients?  What is the last new business idea, service or value-add you implemented? If it was a while ago, are you already one foot out the door?   If you are not growing, you are not that attractive.
  • Is the business too much about you?  If you are doing everything, he may think you are not flexible. The more you outsource and delegate, the easier it would be for him to see himself take over.

Being realistic is difficult sometimes but necessary when considering your future. A unicorn is not going to fly into your firm and make it better and neither is Dave.

Share Button
John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

Learn More About John Anderson



HNW Whitepaper

Recent Tweets