The biggest emotional barrier to selling a financial advisory firm is a fear of losing control of a lifetime of work, according to DeVoe & Company.
In addition, RIA owners are afraid of selling to the wrong buyer, the firm said in its latest whitepaper prepared by DeVoe & Company and Allworth Financial titled: “The Heart of the Deal: Understanding and Overcoming the Emotional Barriers of Selling Your RIA,” which was released today.
Research done for the paper shows that “the selling process can create a cycle of emotions that, if not managed, can stall or derail what would otherwise be a strong partnership,” the report said.
Thirty-four percent of the advisory firm owners and executives who were surveyed, said losing control was their biggest fear. Another 23% are concerned with selling to the wrong buyer. At the same time, 72% of firm principals said they want to remain in some sort of leadership or senior advisor role for several years or longer. The survey included 112 advisors. In addition, eight one-on-one interviews were conducted with recent sellers.
“Client care is top of mind as both a fear and motivator when contemplating a sale, with 22% choosing it as a top concern and 42% choosing it as a top motivator,” the report said.
“Selling your firm is likely the most important business decision of your career. But it is also a profound personal decision. All sellers will experience an emotional rollercoaster through the process,” David DeVoe, founder and CEO, DeVoe & Company, a consultant and investment bank, said in a statement. “Anticipating the strong emotions that will emerge will optimize the likelihood this important transaction gets completed, and the new partnership starts on the right foot.”
“We see it all the time, principals work to build something they can be proud of, then it comes time to think about what’s next,” Pat McClain, co-founder of Allworth Financial, a financial services firm based in Sacramento, Calif., added in a statement. “You pour your heart and soul into nurturing something, then it comes time to sell, and you’re faced with feelings you couldn’t have anticipated.”
The emotional impact of a sale develops because of the relationship most RIA owners have developed over the years with clients and staff, the report said. Being prepared for dealing with the emotions and choosing the right time to step away are crucial in the process.
“By engaging with both the positive and the negative emotions of selling, you can create a measure of emotional comfort that will serve as a buffer when you feel challenged or uncertain,” the report said. ”Advisors who proactively engage with the emotional side of selling will be most successful in completing a transition that is good for their clients, their staff and the owners themselves.”