Succession Planning: How to Partner with a Younger Advisor | Lord Abbett

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Practice Management

New talent can pave the way for a succession plan that protects existing clients, while potentially attracting new, younger clients to the practice.

This Practice Management article is intended for financial advisors only (registered representatives of broker dealers or associated persons of Registered Investment Advisors).

For older advisors, bringing on new talent helps pave the way for a succession plan that protects existing clients, while creating a payout for the founding partner. Indeed, even if younger planners don’t eventually become equity partners, their presence can help the founder show potential buyers that they will be getting a thriving standalone business, not just a client list.

Another attraction of young blood is that they are more likely to bring in clients their own age—which again can boost a firm’s value in the event of a deal. “December guys’ clients are all Decembers, so all a buyer is doing is picking up clients in the consumption phase,” says Mark Hurley, chairman of the Fiduciary Network, which invests in wealth management firms. “The older [clients] are not that profitable, and they’re going to get less profitable over time.”

In theory, at least, these couplings have something to offer younger advisors as well: an established client base, an experienced mentor, and the opportunity to leapfrog past the startup phase of a new company.

Yet, as with most fairy tale romances, such connections take more work than simply waiting for Prince Charming. And the challenge can be particularly tough at solo or small baby boomer-run firms. “I think it’s hard for somebody in their 20s to pair up with Decembers because these are people who are trying to build their valuable skill sets,” says Elizabeth B. Nesvold, managing partner at Silver Lane Advisors. “They may be looking at bigger platforms to get their footing.”

Few Potential Partners

The dynamics of the industry’s succession-planning crisis owe plenty to baby-boomer demographics, but the recent stock market bust and boom played a role as well. Advisors tend to neglect succession planning during a crisis, as they did during the financial meltdown. But industry matchmakers say the bull market made business almost too good. “They’re not motivated to sell now because they’re enjoying what they’re doing,” says Patrick Jinks, director of practice planning and acquisitions at Raymond James Financial Services. “The common thing we hear from financial advisors is, 'I really don’t know what I’m going to do when I’m not doing this anymore.’”

The problem is that when advisors do get around to selling, demographics are against them. Some 66% of advisors are older than 50; just 3% are under 30. Jinks says, “We’re seeing a shortage on the lower end of the spectrum.”

That’s one reason that the matchmakers caution advisors not to put off “dating” younger advisors. Nesvold remembers that 15 years ago, 60-somethings could get away with putting off a succession plan until a few years before retirement. No more. She now counsels clients to have a “10-year runway” to train younger partners.

Many advisors put things off until a deal is forced upon them. Often, Jinks says, he sees 65-year-olds merging with 58-year-olds, co-branding for a short time—maybe three months to three years—and then transitioning out of the business over several years. Often, these advisors end up merging with someone similar to themselves—gaining neither a long-term successor nor a way to cash out their equity.

Spotting Intern Talent

Some advisors have gotten help—with either outright matchmaking or help training a successor—from their independent broker/dealer or custodian.

Pam Rigsby, 47, an advisor with Raymond James Financial Services in Raleigh, North Carolina, with about $110 million in assets under management, had already started thinking about how she would eventually sell her practice when she met Kelsey Plummer, now 24.

Plummer started out as an intern with Rigsby while still in college; that summer gig turned into not only a job but also a likely partnership. “Kelsey was a gift from God,” Rigsby recalls.

Raymond James’ Advisor Mastery Program—in effect, a two and a half-year apprenticeship—helped Rigsby bring Plummer on; the firm helped offset the costs of training, sending her to the home office in Florida for periodic instruction. (Other independent broker/dealers offer similar programs; Securities America, for instance, announced its expanded Associate Advisor Coaching Program earlier this year.)

While in the Raleigh office, the younger woman is treated like a pro. “When we sit down with clients... we are equal partners,” Rigsby says. “I don’t want the client to feel they can’t call and ask her a question about a security.”

After the program is complete this July, when Plummer sits for her CFP exam, she will get an ownership stake in the practice. The plan is for the stake to increase gradually, with Plummer taking over while Rigsby is still there. The older woman has set a 10- to 15-year glide path to retirement. At the end, Plummer will be able to buy out the remaining share of the practice she does not own, or keep Rigsby on to supervise or do compliance while slowly buying her out.

For now, everyone is happy. Plummer is stepping into investment selection, leaving Rigsby more time for big-picture planning, landing new clients, and coaching her daughter’s varsity tennis team. Clients are pleased as well. “They’re happy to see someone working with Pam whom they’re comfortable with, and then [know that] I’ll be there for the rest of their lives,” Plummer says. “More clients than I thought have been appreciative of that.”

Classroom Team

Advisor Jared Roskelley, 37, met his 69-year-old partner, Bob Jackson, while they were both attending a fast-track CFP program more than a decade ago. At the time, Roskelley was working in his father’s planning firm, where he had been since graduating from college. Jackson said he knew Roskelley was happy at the family firm, but said that if things changed, there was a standing offer to join him in his Scottsdale, Arizona, firm, Jackson Financial Advisors.

Two years later, there was a change: Roskelley’s family firm undertook a merger, and when the ensuing culture clash left the younger Roskelley unemployed, he took Jackson up on his offer.

That was eight years ago. Since then, Roskelley has moved from being an employee to a shareholder, and is now president and director of financial planning for the firm, which has more than $150 million in assets. Jackson, meanwhile, has transitioned to a four-day workweek and works in his mountain home 90 miles away. He expects to downshift to two days a week by the end of this year.

Jackson says the plan has worked “beautifully over the years,” in part because he treated Roskelley as an equal partner “from the get-go. He knew his input made a big difference. It always worked because we treated each other with respect.”

The pair’s original plan called for Jackson to retire by 2010, but the financial crisis of 2008 derailed that. Now the transfer is scheduled to be completed in 2017. As of early April, Roskelley was on track to become a 50% owner by May, and will become the majority owner upon Jackson’s retirement.

“The decision for me was happenstance, but it turned out to be the best career decision I could ever make—partnering with an older advisor,” Roskelley says. “There are not a lot of people with the wealth that need our service at [my age],” he adds. “At Bob’s demographic, there’s a wealth of people who need wealth management and financial planning.”

—-Elizabeth Wine, a writer in New York, has contributed to Barron’s, The Financial Times, and On Wall Street.




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