Don’t Sell Your Firm, Redesign It! is one of our most read articles to date. In fact, advisors continue to download this article four months following its publication. The reason? It strikes a chord. Advisors are getting older. They do not have a continuity or succession plan. And they are considering alternatives. While they review these alternatives, the decision is consistently coming down to one simple decision: are you really ready to give up your independence and work for someone else? Our conversations suggest the answer in the end is NO! Here are three such stories …
- Advisor #1. Last year I met an advisor at the Schwab IMPACT conference. He recognized that he needed additional resources to compete. He also needed a continuity / succession plan as he, like so many, had reached his fifties. He decided to sell his practice to a large RIA the year before and planned to finish his career there. No sooner than I mentioned that Pinnacle Advisor Solutions was in business to support independent RIAs so that they did not need to sell, than he shrugged and sighed. He wished he had not sold his firm. He missed his independence. He asked to stay in touch because he might breakaway and resume an independent career.
- Advisor #2. We entered conversations with an advisor with a $100MM firm who was concerned about the sustainability of his practice. He was concerned his business model would break if one or more employees ever decided to leave. He was looking for an institutional solution like Pinnacle Advisor Solutions that would always be there to support his business. He was courted by several name-brand consolidators who were interested in acquiring the practice and allowing him to finish his career as a W-2 employee. He consulted his mentoring group of various business owners. Their answer? You have a good thing going, don’t ruin it by giving up your independence.
- Advisor #3. We entered conversations with a $35MM firm. This firm had previously peaked at $80MM but lost a considerable amount of 401K business to mergers. This 60-year old advisor wanted to accelerate growth and climb back to $100MM to finish her career. To find the time to focus on clients, sales and marketing, she needed additional resources. Like Advisor #2, she was courted by a large RIA who would acquire her firm and allow her to finish her career as a W-2 employee. She also considered Pinnacle Advisor Solutions. In the final analysis, she realized she had worked for herself for more than 30 years and could not imagine working for someone else. She is the latest advisor to participate in our strategic partnership program.
Unfortunately there is a steady drum beat in the press telling the independent advisor (a) that he or she does not have the resources and therefore ought to sell, or (b) that he or she is aging without a continuity plan and therefore ought to sell or (c) the regulatory environment is changing to favor large firms and broker-dealers and therefore ought to sell.
The problem is this drumbeat ignores two important facts: (1) that unlike 15-20 years ago, there is now a robust ecosystem of firms like Pinnacle Advisor Solutions in business specifically to support independent advisors and (2) that consolidation advocates ignore a very important fact: most independent advisors left large firms for a reason and are loathe to return. Indeed, I speak to hundreds of advisors every year and have yet to meet one interested in selling. In virtually all cases, they want to “die with their boots on”. They just want to design a business model that does not require them to work 25 hours in a 24 hour day. That’s where Pinnacle comes in.