Presentation Scheduled for Tuesday, 2:55-3:45 pm
Anticipated CE: 1 CFP, 1 NASBA/CPE, 1 CIMA, .75 CLE Stnd
Generational Partnerships as Growth Strategy, Vision Setting, Business Legacy
Are you getting older? Do you have a growing client base in a practice that you enjoy? Have your clients asked you about your succession plan? Are you more than 10 years away from retirement?
If you can answer yes to any of the above questions, then you just may be right for a Generational Partnership.
Now you may be thinking, “No way. I don’t do partnerships.”
I hear you, and I get where you’re coming from. Now hear this:
In my work as a transition consultant, I encounter clients with businesses of every shape, size, and structure. One common theme is that very few like to face the inevitable questions that come from clients when asked about how they will be protected should something happen to you, their trusted financial advisor.
Generational Partnerships is a concept that, while not new, is one that takes careful planning to receive the reward. Sound familiar? It should, as planning is a value you provide to your clients on a daily basis.
In its simplest form, a Generational Partnership is a relationship that benefits two or more advisors by protecting the business from client attrition by ageism while allowing for marketing and growth opportunity throughout the life of the business. Generational Partnerships can work for advisors of many ages and sizes, but let’s look at one example and extrapolate the benefits to a variety of practices.
Advisors in their late 40s and 50s can experience a tremendous amount of growth. However, this is also atimeframe where their peers have reached a certain point—a point where planning questions become ever-present and more complicated to answer. Mid-career advisors may also experience a loss of enthusiasm for the business or just the inevitable reduction hours as they reap the benefits of the work done earlier in their career. In addition, and not to be understated, these advisors also have the means to really begin to enjoy life outside the office.
As advisors would come to me with questions, I began to see a familiar pattern. Most financial advisors work through this uncertainty by buckling down and driving towards an arbitrary objective. Once the advisors themselves reach their early 60s, theywould stick their head up and look around for succession opportunities—only after their clients begin to pester them about the long-term relationship and how their needs will be met after retirement.
To counter these common trends, I have been working with advisors to form Generational Partnerships that allow for a continuation of business growth, a renewed vigor for the mechanics of the practice, and the ability to enjoy life outside the office without hampering organic growth.
When forming a Generational Partnership, two or more advisors come together with an age gap of roughly 10-20 years to act as the buy-sell, marketing partner, and long-term buyer of a practice. So how does it work?
Senior Partner and Generational Partner discuss business growth and retirement vision. A discussion centers on client service philosophy, client acquisition practices, and staff utilization. Mutual respect and understanding, but not necessarily agreement, is reached around investment philosophy and financial planning specifics. Why? Like individuals, no two practices are exactly alike and it’s unlikely that two driven individuals can agree on everything.
After an intensive consulting process, two partners agree they have enough common interests to form a buy-sell. The next step is to agree on the marketing and growth. This allows an advisor to avoid the inevitable business attrition that happens in the late 50s and early 60s while also allowing a practice to sell clients as they experience top-end growth. The Generational Partner is working with Senior Partner on second-generation retention and the long-term viability of the enterprise.
Benefits to a Generational Partnership come in the form of increased business value because of client retention and greater overall size of the practice as compared to a solo or age-similar partnership. In addition, the succession plan is built into the mechanics and can be something that is experienced all at once or drawn out over a period of years.
So why don’t more advisors create Generational Partnerships? Many advisors don’t want to take the time to focus on the business itself (especially the time to consider the business as it will stand in 10-20 years). Other advisors have considered the idea but are spooked by the risk that the partnership won’t work out.
It is recommended that an outside party help you evaluate potential business partners and lend a voice for a smoother transition. Once the transition is complete, the benefits are astronomical. With a greater total practice growth, better work-life balance in your 50s and 60s, an increased business value, and a defined succession plan, the early investment is very handsomely rewarded.