Among today`s experienced financial advisors who want to sell their independent consulting firms, it is almost impossible not to find someone who has either started his career in a wire house or who has been trained by someone who has been. As a result, almost all of today`s independent consulting firms continue to structure their compensation in the form of a thread: benefits directly related to the best income, often accompanied by an „Eat What You Kill“ (EWYK) mentality. In a wire house – where consultants don`t have their underlying businesses anyway – it`s a subtle compensation structure, but in an independent consulting firm, Grau convincingly asserts that, ultimately, it`s both the value of the business and the ability to develop a succession plan that makes it the most destructive. John has operated his own independent RIA since the early 1980s and has managed nearly $150 million in assets with a concentration of clients on the East Coast. Although he liked the business and did not plan to retire in the short term, he recognized on his own the need to put in place an estate plan to ensure that his clients were well cared for in the event of an unforeseen event. In this context, John spent several years without success looking for a successor. Finding the right person who had access to capital, a similar investment philosophy, work ethic and client approach proved more difficult than expected. Eads, 36, reports that he is in the process of entering into a buyout agreement with another local, only for fees – although he is a few years before his retirement, he wants to protect his clients and his family in the event of a disaster. Even without a buy-sell, some consultants have fairly comprehensive civil protection plans and succession plans. Ryan McKeown, CFP and senior vice president at Wealth Enhancement Group in Mankato, Minnesota, says he has a succession contract with the other advisor on his team, who is younger.
McKeown or his estate receive a percentage of the team`s earnings for four years after retirement, disability or death. On the other hand, a real succession plan – at least according to Le Gris – is a plan that allows the company to continue intact and survive. Indeed, Grey`s definition of a true succession plan implicitly assumes that continuity must come into play in the pursuit of a business: it may be gratifying that many advisors are interested in taking back your book and are willing to spend time meeting with you and your clients for several years before the transition.