Planning Your Legacy
Investment Advisors choose to practice their crafts under the RIA structure for a wide variety of reasons. Whether it's the desire to support clients as a true fiduciary, the ability to provide superior service, or simply the dream of operating as an entrepreneur, the motivations are compelling.
However, central to every RIA practice is growing the business and increasing its monetized value when the advisor elects to retire or sell. And even if that transitional event is years away, advisors would do well to focus today on implementing strategies that can help maximize a firm’s value for when that big day becomes a reality. This post highlights several tactics you can put into play to begin increasing the value of your business.
Embrace a Holistic Advice Model
It's no surprise to you that clients’ needs for sound advice often extend far beyond investments. Concerns about health care costs in retirement, second careers, aging in place, cognitive decline, and transitioning wealth to the next generation are all critical life events that deserve the counsel of an expert. Ironically, while many advisors field these inquiries from clients, few practices embrace an actual holistic advice model, and even fewer articulate that well. However, for potential RIA buyers, holistic advice practices are of interest because advisors who invest their efforts to know all aspects of their client’s lives are much more likely to hold onto assets when wealth transfers to the next generation.
Taking Action:
Commit to researching and learning more about the strategies other top advisors are using to address clients’ larger questions and issues related to the non-investment areas of their financial lives. Many trade publications in our industry discuss these topics, including RIAIntel, ThinkAdvisor, Financial Planning, and Investment News, and you can subscribe to their email lists and follow them on LinkedIn to get timely articles. Then, once you are comfortable with a given topic, start writing articles on the subject matter and share them on your website and social platforms.
Invest in Talent
Prospective buyers will be keenly interested in the quality of your staff and the depth of their experience when evaluating if they want to buy your RIA. Why? Because even though you are the cornerstone of your firm, your brand, and your client relationships, the team you have assembled should reflect your same commitment and values and should be equally respected by your clients. If not, your practice is at risk of losing clients and assets when you depart.
That is why you must focus on attracting top talent, offering win-win performance-based compensation plans, providing continuing education and growth opportunities to team members, and sustaining a culture where everyone wants to stay.
Taking Action:
Several HR and recruiting firms help RIAs find talent and implement proven employee retention strategies. As a starting point to identify ways to create a team culture that potential buyers will value and appreciate, Schwab has an excellent playbook on recruiting that you should explore for more ideas.
Implement Digital Marketing
Chances are, you rely heavily on referrals to find new prospective clients. Most independent advisors do. But a well-designed digital marketing program that allows you to reach a vast audience of qualified prospects and convert them to new clients will be of great interest to most potential buyers. Marketing and business development are often neglected areas of an RIA practice. So, a firm that has designed and executes a consistent, integrated program to exploit organic growth opportunities will be far more valuable than a firm that does not.
Taking Action:
Online, you will find dozens of highly-qualified digital agencies that work exclusively with independent advisors. Schedule introductory conversations with a few firms to learn about costs and whether you would like to hire your marketing talent internally, outsource the work to an agency, or use a hybrid approach.
If you prefer to keep your marketing efforts in-house, we've assembled this RIA Marketing Crash Course with a ton of information
Get Operationally Efficient
A well-run practice is a practice that keeps operational costs low and uses technology to its advantage. Easier said than done, however. Unfortunately, many independent advisors who have started their RIAs quickly learn that a host of the technologies and support services their broker-dealers provided are now the advisor’s responsibility. And while technology can be your friend, identifying and integrating the technologies essential to creating great client experiences can rob advisors of valuable time they should spend with clients and prospects. This scenario may sound familiar to you.
Operational efficiency is meaningful to buyers evaluating RIAs because it speaks to the firm’s commitment to embracing technology as an effective way of keeping operating costs under control and ensuring operations can scale as AUM does.
Taking Action:
Premier Turnkey Asset Management Platforms (TAMPs) understand the needs and challenges of RIAs and are constantly improving their technologies and service offerings to equip advisors with the tools that keep clients happy and engaged. Now is a good time for you to audit the platforms and technologies you currently use to ensure they provide the efficiency they should and will readily satisfy any questions prospective buyers may have when conducting their due diligence. You can start that review process by scheduling a no-obligation platform assessment with our team at GeoWealth,
You created your firm for specific reasons, and one was to increase the enterprise value of your business so you could enjoy the financial rewards of your efforts when you decide to sell it. While there are many ways to maximize the value of your business, we hope the strategies we have discussed here help get you started as you build a practice that will have potential buyers lining up at your door!
