SEI Survey: Majority of Advisors Live for Today, Lack Plans for Tomorrow
SEI Identifies 6 Guidelines to Help Firms Build Lasting Value
OAKS, PA -- (Marketwire) -- 03/12/13 -- While prevailing industry
research shows that the overwhelming majority of financial advisors
are 50 years or older, most advisors don't have effective plans for
the future of their businesses, according to an SEI (NASDAQ: SEIC)
survey released today. More than two-thirds of advisors polled (68
percent) say they have no formal succession plan for their businesses
and despite aging client bases, more than half of those polled (54
percent) have no strategies in place to attract younger investors.
The survey, of more than 100 financial advisors, points to a need for
advisors to understand the importance of creating a strategic
succession plan with a focus on building long-term business value and
"Simply preparing a succession plan is no guarantee of successfully
transitioning the firm to new owners, but it is an important step,"
said John Anderson, Head of Practice Management for the SEI Advisor
Network. "Rather than preparing a plan to sell your firm, you need to
prepare your firm for sale. That starts with taking an in-depth look
at your book of business and processes. It's important to have a plan
in place to develop the next generation of leaders at your firm and
to take a strategic approach to securing the next generation of
clients your firm will serve. This more comprehensive view of
succession planning ultimately increases your firm's value."
The survey results also revealed that even advisors with formal
succession plans may lack specifics in those plans. More than a third
of advisors (39 percent) with a succession plan admit they're not
sure to whom they'll ultimately transition their businesses.
Meanwhile, nearly half of those polled (47 percent) with formal
succession plans said they plan to transition their businesses to "an
identified internal buyer," while only 14 percent plan to transition
to "an outside buyer."
"One of the things that became apparent as I built my succession plan
was how important the long-term viability of my firm was to me
because of the time I spent building my practice to where it is
today," said Tom Liccardello from Compass C
apital in North Andover,
MA. "I think it's easy for advisors to get caught-up in what happens
day-to-day and not consider the future. I took a step back to look at
the big picture and to make sure that the firm would survive without
me. I'm now putting a plan in place that will transition the firm to
my daughter when I'm finally ready to retire."
To assist financial advisors in preparing their firms to be sold, SEI
identified six key ways advisors can enhance the value of their
firms. The six-step action plan includes:
1. Understand Younger Investors - A surprising amount of America's
wealth is held by investors under the age of 50, but many advisors
ignore this growing segment. That's a mistake. According to various
research reports, investors under age 50 are increasingly trusting
and willing to pay for financial advice. But advisors can't use the
same old techniques to win their confidence. Advisors must understand
the habits and mindsets of younger investors and cater to their
individual preferences in order to attract the next generation of
clients and ultimately, build more sustainable businesses.
2. Build Enterprise Value - In today's environment, many firms aren't
worth what their owners think they're worth. But to truly build value
demands a change in mindset. It requires building trust and
relationships between clients and the firm as a whole, not just
clients and individual advisors. It means focusing on practice
management as much as managing investments, and it means continually
keeping an eye on the long-term goal of building enterprise value.
3. Recruit, Train, and Retain Younger Advisors - Growing a firm
depends on attracting the next generation of clients and that, in
turn, depends on recruiting the next generation of advisors. That's
easier said than done, especially when only three percent of advisors
are under the age of 30. To compete for the best young talent, a firm
needs to provide training, technology, and a great environment; a
firm must articulate a plan for growth and position itself as a
destination for up-and-coming professionals -- and clients.
4. Create a Next-Gen Education Program - Industry surveys show that
younger investors are hungry for information and many times they're
relying on employers, friends, or the internet to get it. That
knowledge gap is an opportunity for advisors. Create an education
program to help the next generation understand and address the issues
they'll face as they inherit more wealth and manage larger estates.
Additionally, complement the investor-education program with a
topical training program for advisors, which will help the firm
create relationships early and leverage them for the long-term.
5. Rethink Standard Operating Procedures - Growing a business
requires taking a hard look at all aspects of the business, including
processes, client service, technology, and transparency. Then, be
ready to make the changes necessary to ensure the firm's operational
procedures can support your vision for long-term growth. The ultimate
goal of this process is to create a business that would make it
possible for a potential buyer to take over with limited
6. Manage Wealth, Not Assets - It might be a slight distinction, but
research shows that advisors who consider themselves wealth managers
earn more money, have deeper relationships, and build stronger
practices than those who call themselves financial advisors. Advisors
shouldn't limit their businesses to investment management. A wider
range of expertise will create more opportunities to strengthen
relationships with clients, drive more revenue, and ultimately build
the firm's value.
To access SEI's Succession Planning the Next Gen Way Toolkit,
including a paper on developing an action plan for strengthening a
firm, a transitioning checklist to help determine a firm's value, and
access to a succession planning webinar, please visit here.
About The SEI Advisor Network
The SEI Advisor Network provides
financial advisors with turnkey wealth management services through
outsourced investment strategies, administration and technology
platforms, and practice management programs. It is through these
services that SEI helps advisors save time, grow revenues, and
differentiate themselves in the market. With a history of financial
strength, stability, and transparency, the SEI Advisor Network has
been serving the independent financial advisor market for more than
20 years, has over 5,400 advisors who work with SEI, and $33.7
billion in advisors' assets under management (as of Dec. 31, 2012).
The SEI Advisor Network is a strategic business unit of SEI. For more
information, visit www.seic.com/advisors.
SEI (NASDAQ: SEIC) is a leading global provider of
investment processing, fund processing, and investment management
business outsourcing solutions that help corporations, financial
institutions, financial advisors, and ultra-high-net-worth families
create and manage wealth. As of December 31, 2012, through its
subsidiaries and partnerships in which the company has a significant
interest, SEI manages or administers $458 billion in mutual fund and
pooled or separately managed assets, including $201 billion in assets
under management and $257 bil
lion in client assets under
administration. For more information, visit www.seic.com.
+1 215-564-3200 x110
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