Nucleus has published a guide to help financial advisers assess the options and challenges involved in developing a succession plan and then create and execute an effective exit.
According to the wrap platform, succession and exit planning have become hot topics as the increased burden of regulation, influx of provider-owned advice and number of advisers hitting retirement over the next few years all mean more advisers than ever are considering their options.
Nucleus said it therefore craeted Planning your exit: A guide to creating a succession plan and exit strategy, in collaboration with management consultant Kingmakers' director Rob Stevenson, to provide advisers with information on developing a succession plan - either through internal succession or an external sale.
It also considers the options and challenges involved in succession and how to execute an effective exit.
A survey of more than 200 advisory firms by Nucleus found that, of those considering long-term succession planning, two-fifths (40%) of advisers anticipated selling to another advisory firm. Almost a third (30%) expected to sell internally, to a family member or through a management buyout while 13% expected to sell to a consolidator and fewer than 2% to a provider.
Nucleus business development director Barry Neilson (pictured) said the survey had identified a rise in those considering internal succession.
"Advisers want to sell to those who understand the business has been their life's work," he explained. "They have a uniquely close, long-standing relationship with their clients so they may look to this option as the one with the greatest level of continuity for clients and employees."
While succession planning was not "rocket-science", said Neilson, advisers should be careful not to leave planning it too late. "Many elements of a robust succession plan come to fruition over time and require long-term resource commitments, so the longer advisers wait, the fewer options they may have," he added.
"Success requires owners to start planning as soon as possible, to get behind the headlines and relentless emails promising great riches and to unpack what they have and what's actually possible."
Neilson continued: "The challenge of succession is to satisfy the leadership and longevity issues of the firm while addressing the entirely reasonable financial interests of the founder. At the same time, protecting staff, ensuring continuity for clients and minimising disruption and risk can make for a tricky balancing act."
Space and time
Once the sale process starts, said the guide's co-author Stevenson - and particularly if it is to an external buyer - advisers will want to have as much space and time as possible, as "decisions come thick and fast and it can be exhausting".
He added: "There are many ways to enhance enterprise value before and during the planning process and just as many ways to give value away by not structuring a deal properly.
"Finding the right fit is ultimately the key to extracting the maximum value over the entire timeline of the transaction, while balancing the requirements of all the other stakeholders of the business.
"It is also important for advisers' legacy. Whether it's the Old Town in Marbella or Bridgetown in Barbados, the last thing they want to be doing is crossing the street to avoid an ex-client."
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