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won't even continue the conversation if
there isn't that recognition that we want
to be able to bring the entire set of advice
capabilities to the client, " says Finn, who
works out of New York City and also heads
wealth management corporate and institutional
solutions for the firm. " If someone
is joining us and isn't interested in bringing
wealth management or financial wellness,
that's not a good fit for us-so you ought
to be clear about what you're solving for. "
" So we have this interesting dilemma
of: Assets are growing-except for
this year-and we're being asked to
provide more service to our clients,
but there are fewer of us to do it. "
Planning Outside of M&A
Succession planning also extends beyond mergers and
acquisitions for Tom Simonson, managing director of the
retirement solutions group at Creative Planning in Charlotte,
North Carolina. He, too, determines the success of
M&A more as finding a good cultural fit than in defining
contract terms.
" I don't think there's a one-size-fits-all solution to succession
planning, " Simonson says. " And certainly, we've seen an
increase in M&A activity ... for those firms that are looking
for that as their succession plan. "
Depending on the circumstances, other options Simonson
sees working effectively include hiring from the outside or
transitioning leadership of the firm to other team members.
But, regardless of the specifics of the change, Simonson
encourages creating what he describes as a thoughtful transition
plan. In most cases, he has seen that a 12-to-18-month
period works best, but it depends on the familiarity of the
person taking over the client relationships. One of the top
considerations for Simonson is: Was that individual new to
the clients or moving up from a supporting role?
Establishing a team approach ahead of a change in leadership
can also help build new relationships and introduce
change before any formal hand over.
" There's no doubt, if you have multiple professionals
involved with [the] client relationships, that gives you more
options when you start thinking about what does the transition
plan look like? " Simonson says.
Communicating well in advance of any changes is also
an essential part of a well-thought-out transition. Simonson
notes that a team member's retirement is often anticipated,
but bringing in potential replacement team members ahead
of time builds trust and comfort.
In Hammond's experience, keeping the principal engaged
with the business for five years or more after the sale can be
beneficial. " The longer time horizons allow us, in our centralized
support model, to have an impact on the business and
help it grow faster, " he says. " It allows the selling party to
benefit from that growth, and everybody ends up better off,
the longer that time horizon goes. "
For those longer time horizons, deal terms that include
revenue sharing vs. a traditional equity or asset-based transaction
often help support a joint partnership by aligning
interests, Hammond says. " It's hard if you do a traditional
acquisition and the adviser becomes an employee, and their
upside is limited, " Hammond says. " It's hard for that adviser,
in my opinion, to think ahead 15 years, or 10 years, because
they're like, 'I have a three-year earn-out, and then after that
you guys pretty much get all the upsides.' "
Jeremy France, head of Graystone and Institutional
Consulting with Morgan Stanley Wealth Management, also
sees the advantages of a transition managed over a fiveyear
period, but he emphasizes the need to be flexible with
timing, depending on advisers' preferences.
" We have some who come and say they want to work
with their clients to transition after a three-year period and
then do something larger with Morgan Stanley, and others
purely want to retire, " says France, who is based in New
York City. " That's one thing our channel allows for-that
complete flexibility in that decision, where they can be a
part of the future success or sit back and watch the growth. "
Finding the Next Generation
Looking further ahead, a potentially much more difficult
succession problem to solve lies in the need to cultivate the
next generation of advisers. " As an industry, we have a major
problem, which is we have almost two advisers retiring for
every one coming into the business, " Hammond says. " So we
have this interesting dilemma of: Assets are growing-except
for this year-and we're being asked to provide more service
to our clients, but there are fewer of us to do it. "
Hammond also sees the need to find new avenues for
training junior staff, as prior methods, such as getting a start
at a wirehouse, are becoming less common. Pensionmark
relies on an internship-to-hire program that it began over
30 years ago-most of its executive team got its start there,
including Hammond.
For Simonson, too, creating new training approaches is
essential to developing a new generation of advisers. Over
the years, he has seen adviser firms recruit from recordkeepers
and administrators, which traditionally provided
strong training, including in technology. But an unintended
consequence of fee compression and more widespread adoption
of technology has meant less hiring and training and
development of young professionals by those recordkeepers
and administrators, he says.
" We can do a better job as an industry as a whole and
create an environment they want to enter into and stay
engaged with over time, " Simonson says. " It's tricky because
it's a highly technical industry and not something you learn
in college-it's a learned skill. " -Elizabeth Harris
planadviser.com November-December 2022 | 37
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