Of course, once you've found an appropriate pool of potential successors, you still need to be able to identify the advisor who will ultimately be the best fit for your business. The following are the top five attributes you should be looking for when seeking the right partner to acquire your practice:
1) Does the new advisor share your skill set? Although every book of business encompasses a wide range of investments, each also has its own general investment personality. One of the most basic requirements is that an acquiring advisor be able to service the diverse needs represented in your book of business.
2) Does the advisor share your values and business vision? Skills aside, it is also important that the new advisor is on a similar “wave length” in terms of clients’ investment styles and attitudes, so that a merger of two books of business does not end in a clash of investment cultures. Values and vision should not only include investment style, but personality as well. Clients are most often attracted to those who are "liked," trusted and competent. Make sure your successor has enough in common with you to ensure the "relationships" transfer as well as the accounts.
3) Can you show long-term value in your book of business? Rather than just being an aggregate of investments, can you demonstrate that your book of business has a runway for future development by the acquiring advisor?
4) Is there physical proximity to your new advisor? This can often get overlooked, but it is useful to enable frequent interactions between client and advisor, especially during those times when clients need to reinforce their feeling of confidence that the advisor is available.
5) Does the new advisor bring additional skills that you don’t have? This can be an important selling point in successfully transitioning your book of business to the new advisor. After all, although clients may think they want a replica of their previous advisor, if you can demonstrate that the transition may actually enhance their account—in the breadth of expertise it provides or in the quality of its service—then your clients will be more willing to make the transition and give it time to succeed.
As we know, many advisors don’t plan adequately for succession, and that’s become a worrisome problem. In fact, advisors should be thinking about and planning their succession years before they are ready to walk out the door for the last time. By leaving your practice in the best possible hands, with a like-minded advisor who will enhance the business as well as increase the value of its assets under management, will be performing a final service to the clients whose financial lives you have spent so many years steering towards fulfilling outcomes.
Jeffrey Rosenthal is president and CEO of Triad Advisors (www.triad-advisors.com), the hybrid advisor-focused independent broker-dealer.