Succession & Valuation

"Right now in the industry there's about a 20% adoption rate for independent practices or practitioners to have a continuity or succession plan in place," notes Matt Matrisian, VP of practice acquisitions for Raymond James Financial Services. "At Raymond James, we're up to about 45% now–more than double what the industry is."

At the FSI OneVoice Broker/Dealer Conference in late January, Matrisian participated in a session on internal succession discussing the steps that advisors and independent B/Ds need to take when developing a succession plan. According to Matrisian, the average age of advisors is 54, "so from an independent B/D standpoint, they are probably looking at their advisor base and saying, 'We've got an aging advisor base that we're dependent upon from a revenue and stability standpoint. How are we going to assist them in this transition process?'" Matrisian says that assistance could take the form of being more actively involved in the succession process or providing reps with tools to do it themselves.

When it comes to valuing a firm, a market-based valuation approach may be easy but may not be indicative of the firm's true value. "There are a lot of risk factors associated with individual practices, like age of client base and whether clients are contributing new assets or they're in the distribution phase," he says. The solution? Matrisian says advisors considering selling their practice should be thinking about it way ahead of when they want to sell. "We try to act more as consultants and find out their timeframe and what their practice looks like now and what they expect out of their practice. Then, we walk through a plan for them."