The great transfer of assets is underway – not just for clients of wealth advisors, but for wealth advisors themselves, as an increasing percentage of financial planners, brokers and independent advisors reach retirement age.
Two years ago, Cerulli associates found that the average age of financial advisors had already topped 50 years, and 43% were over 55. In a business where identifying successors, transitioning clients and arranging financing for the transfer of equity can take a decade, more than a third of financial advisors have entered the traditional pre-retirement age of 55 to 64.
Advisors who are nearing retirement can take steps right now to maximize the value of their practice, in a hot market where wealth planning firms focused on fee-based business command attractive multiples. Finding the right people to take on leadership, institutionalizing the processes and relationships that support growth and building long-term relationships, especially through multi-generational structures like trusts, can significantly increase your payout when it comes time to move on.
Adding trusts to a wealth management practice is an often overlooked element in enhancing the value of the firm. Indeed, research shows that comprehensive capabilities are an important driver of business success. The recent 2015 Fidelity RIA Benchmarking Study found that high performing wealth management firms were much more likely to offer trust and estate planning services to their clients than average (60% of clients at high performing wealth advisory firms received trust planning services, as compared to only 40% overall). These high performing firms were faster growing (18.1% versus 12.5% growth rate per year, 2011-2014), earned higher revenues per advisor ($1,055,182 vs. $626,357) and more profitable than average.
Offering trust services also connects advisors to the next generation of clients. “Multi-generational planning is a big plus because invariably you have more stickiness from generation to generation,” says Liz Nesvold, a founder and managing partner at Silver Lane Partners, a boutique investment bank specializing in financial services M&A. “If I know the Smiths but I don’t know the Smiths children, they Smiths’ children may not want to do business with somebody who’s perceived as their parents’ advisor. They may want have their own advisor when the assets pass even through, if the trusts are bust and released at the time they inherit. I think the planning aspect between multiple generations and having means for connecting with the beneficiaries is an important piece of the equation in terms of continuity and stickiness.”
Ben Harrison, head of business development & relationship management at Pershing Advisor Solutions, says that firms that can provide trust services inevitably have more diverse revenues. “Investment managers that are focused on a sole equity strategy or a fixed income strategy, they may do that very well or very effectively, but they only have one sleeve of the clients’ assets. Wealth managers typically would look after the entire client relationship,” he explains. “They have more of an opportunity to provide additional services, whether it’s planning or comprehensive analysis around closely held businesses or tax advice or next gen planning and the implementation of trusts. They have more of a diverse ability to earn revenues, so that would imply that there could be a premium that could get paid for those types of firms.”
Partnering with an advisor-friendly trust company is critical to building a sustainable business around estate planning and maximizing the value of a business for eventual sale or succession. Premier Trust Company is dedicated to your long-term success. To learn more about succession planning and how trusts can be an essential part of your exit strategy, download our free white paper “Endgame planning: Maximizing your firm’s value for a successful exit.”
