FROM THE BLOG

What is your end game?

Posted by Tarah Carlow on December 1, 2016

The end of the calendar year means most of us take a look back and do a check-in; some more thoroughly than others. Some of us will do a quick gut-check and continue doing things according to our current plan. But a lot of us just say “Plan? What plan?” and continue to coast through the days until something happens that makes us focus and, you now, actually plan. As a financial advisor, and especially at the eve of the DOL Rule, many of us are pondering if this financial advising thing is really worth continuing to do at all. We have had a record number of advisors reaching out looking for a succession plan scenario- someone that is interested in buying their book, or taking it over that is more plan-oriented and future-focused.

Here’s the scary part- there is a complete and utter disconnect between what they think their book is worth and what it’s really worth. Cutting to the chase: your book is only worth what someone is willing to pay for it. Sorry, it’s just the truth. Moral of the story? You better make sure you are building something that someone wants and values.

Here are 5 things we each should be thinking about as we are building our books- and yes, planning is essential.

  1. Set your end goal. Decide how much you want to get out of your practice one day and by when. I can already hear you discounting this and saying, “How do I know?”, but don’t fall into that rut. If you are willy-nilly about what you would like to get out of your asset, it will be difficult to make the hard choices and do the things that you need to do to meet your goal. You need to start somewhere… not saying it won’t evolve… but a clear idea of the time horizon you have to set your plan into place and grow your business accordingly is key. Once you have your ‘how much’ and ‘by when’, then work backwards to figure out the goals you need to meet in-between.
  2.  Name your buyer. Again, enough with the “How should I know?”.  It is critical to determine who you would feel comfortable handing off your clients to- and if not specifically, who, then who-ish. In other words, what kind of person or company. You don’t want to spend 10 years building something that is not appealing to the who-ish that you want to turn the keys over to.
  3.  Remove the dependence on you. This is probably one of the hardest things to do. You have put your blood, sweat and tears into building and growing your business and feel good when your clients depend on you. Problem is, for the end game, this is a bad move. This is where setting your time horizon is important. At some point, you need to make sure the clients love the business; not just you. Otherwise, you end up with one of two scenarios- 1) you end up having to stay on for years to make the continuity work or 2) no one wants to buy what you’re selling because without you, it’s worth nothing close to what it is today because of clients leaving.
  4. Training the next generation of “you’s”. I hate to put it like this, but it’s kind of true. While your company is young, hire employees that are green and ready to learn and be molded into how you envision your business. Grow them and they will become little you’s that treat your clients and the business just as you would.
  5. Secure the revenue stream. So, this is kind of a duh moment. If you build your book with recurring revenue, your eventual buyer will have something they can actually sink their teeth into for years to come. Building and maintaining financial plans on an ongoing, expected basis is not only in the best interest of the client, it’s in the best interest for your book too. Prove the value of your business over the long haul; not trade by trade.

Hope this gets your juices going and your brain thinking.

Until next week,

Posted by Tarah Carlow Senior Vice President, Marketing & Advisor Loyalty