The AmeriFlex Group, an advisor-owned hybrid RIA, has paid out more than $8 million to advisors who are part of a new business model designed to provide a transition to eventual retirement for the advisors, the firm announced earlier this month.
The plan, known as SuccessionFlex, paid nine advisors a total of $8.065 million, or an average of $896,000 each, for a minority share of their businesses. The individual payments, which were part of the first round of payments made to advisors, varied by firm size and the agreement signed with AmeriFlex. SuccessionFlex was designed to help mitigate the risks and uncertainty surrounding succession planning for advisors who are within about five years of retiring.
“Retirement for financial advisors using SuccessionFlex does not have to be a black and white event,” Thomas Goodson, president and CEO of the AmeriFlex Group, said in an interview. “This allows advisors to gradually withdraw from the business.”
Under SuccessionFlex, an advisory firm owner can sell a minority interest, usually 30% to 40%, of their revenue stream to the AmeriFlex Group with no minority ownership discount. The advisor retains control of the business and owns all new clients he or she obtains. If the advisor decides he does not want to retire, the money can be repaid to The AmeriFlex Group and the deal is voided. Or the deal can remain in place and the advisor eventually sells the remainder of the business to AmeriFlex or one of its partner firms and retires.
Participants in the first SuccessionFlex group are mostly in their mid-to-late 60s and are ready to take the first steps toward retirement, the firm said. Under SuccessionFlex, which was launched in November 2021, no equity changes hands at the time of the agreement, and the only requirement is that the advisor remains affiliated with AmeriFlex.
“SuccessionFlex is working exactly as we envisioned. It gives advisors the financial flexibility and peace of mind they need as they navigate toward retirement and succession. We worked with these nine advisors over the past few months to ensure that we developed unique deals that would allow each to continue growing their businesses and providing exceptional services to their clients. It allows advisors to retain control of their business while capitalizing on its value today – before retirement,” Goodson said.
The program was developed in collaboration with Larry Roth, managing partner of RLR Strategic Partners, a boutique M&A firm and business consultant. Roth was previously Cetera and Advisor Group CEO.
“With reports of 40% of the financial advisor population looking to retire over the next 10 years, I believe SuccessionFlex is the right program at the right time,” Roth said in a statement. “Exiting the business is a decision that shouldn’t be made in a vacuum, since it has wide-ranging implications for an advisor’s family, staff and clients. We developed SuccessionFlex to take some of the uncertainty out of the succession process, relieve much of the burden and allow advisors to start monetizing their practices while still working.”