Common Exit Options for Retiring RIAs

Why did you start your RIA? Pretty much every advisor has an answer ready for that question. You may share your value proposition, mission or vision statement to give an idea of your firm’s why

Here’s a question that gets far less consideration: Why are you selling your RIA? Of course, there’s the obvious answer: because you want to retire or you’re changing careers. 

But beyond the financial security of selling the business you’ve spent decades building, what do you hope to accomplish through the sale? After getting the right price, what matters most to you?

Today, we want to review your exit options as an RIA, and what each one could mean for the future of your firm (and you).

External Succession Options

There are several external succession options available to RIAs when it comes time to retire

Join WealthPlan Group so You Can Exit on Your Own Terms

We’re not just including this as the first option because this is our blog, we promise!

We have spoken with countless advisors who are looking for exactly the flexibility that joining WealthPlan provides, so it’s important that you know what it looks like.

When you join WealthPlan, you can maintain as much of your brand, book of business, staff and autonomy as you want. 

Set your own schedule for how you want to offload your book of business without washing your hands of what you’ve built by determining for yourself exactly how you’ll hand off clients.

Say you have $50 million worth of difficult clients you want to stop dealing with as you get closer to retirement, but you want to continue working with your favorite clients. We’ll buy the more irritating portion of your book of business and you can continue to work with your other clients while we work together to develop a schedule that works for you to offload the remainder of your business in time for retirement. 

When it happens is entirely up to you. We recognize that you know your business better than anyone else, and we want you to do what is best for the long-term health of your client relationships.

Sell to Another RIA

RIA M&As are in the middle of a banner year. If you’re interested in selling your firm outright, you probably won’t have much difficulty finding a buyer. 

Selling to an RIA can be appealing for advisors looking to offload their business completely, who aren’t too worried about what happens to their firm after it’s sold. This is often a route to take if you have a good, trusting relationship with the team that will take over your firm.

While RIA acquisitions often don’t result in many immediate changes, in the long run, the majority of firms end up making significant changes to branding and staff. 

As you can imagine, this path does not appeal to every advisor. RIAs often choose to go independent so they can build a firm they’re proud of, and it can be hard to see your professional legacy end this way.

In addition, the selling advisor’s idea of how much their firm is worth is often different than the buyer’s. One party wants to get the most out of the transaction, and the other wants the best deal possible. If that sounds familiar, then merging with another firm may help smooth out some of the wrinkles.

Merge with Another Firm

Merging with another firm can help you find common ground by combining a cash deal with a payment plan or earnout over time. A buyer who may not be able to afford a cash transaction will often be open to this approach as they don’t have to put up all the money upfront.

Still, this approach has many of the same downsides of a total buyout, with the eventual takeover of your entire firm.

Sell to a Consolidator

RIA consolidation is moving fast, with the number of firms with more than $1 billion doubling in the last 10 years

It can be hard for smaller firms to stand their ground when larger firms come through town offering cash upfront for a quick sale. 

It’s hard to argue with the fact that rolling up can simplify things for the selling advisor. Often they pay upfront with no long, drawn-out transition process. 

Roll-up offers typically fall into one of two categories: 

  1. The buyer is looking to acquire talent. Eighty-seven percent of RIA M&As are done for this reason. For obvious reasons, this approach does not work for retiring advisors who are looking for a way out of the business.
  2. The buyer is looking to acquire a book of business. In these instances, the acquired firm disappears as it is “rolled up” into the larger firm. 

Internal Succession

An internal succession plan consists of transitioning ownership of your firm to a younger associate, often a family member.

Advisors who have the time and energy often like going this route. It can help keep client disruption to a minimum and allows you to engage with the new owners.

On the flip side, it can easily take years to train up your successor to a place where you’re both comfortable with the successor taking over the business entirely. This often leads to one of two things: A decline in quality of service after you leave, or a feeling of obligation on your part to continue helping out long after your official exit.

One of the biggest challenges beyond training your successor is finding the right successor. If you have a grown child who has shown interest in taking over the family business, this is often the ideal solution because you know your successor fairly well. If you have to rely on recruiting a stranger from the general advisor public, it can be hard to know when you’ve found the right fit.

Weigh Your Options Carefully

What you choose to do with your life’s work is a big decision. Whatever path you take, we would love the opportunity to have a no-pressure conversation about what your exit plan could look like with WealthPlan Group. 

Contact us for a free consultation.

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