Changing Firms as a Succession Planning Strategy

An Opportunity to Maximize Your Transition to Retirement

One of the main concerns of financial advisors is how to successfully transition to retirement. How do you ensure your clients are provided for after your retirement while also securing the best deal for yourself? Although there are several options, we’ve found success in helping clients change firms. Following are two examples of how this might work.

Example 1
Joe Advisor is 55 and wants to retire when he’s 65. He decides to transfer to a large firm and is paid a very large financial package (300% plus, including unvested deferred compensation) by the new firm for bringing his book of business with him. Joe and his team continue managing his clients at the new firm for the next 10 years, generating fees as normal. At age 65, Joe is ready to retire. He receives another lump sum payout to carry him into retirement. The payout he receives is 2½ times his book, paid out over a five-year timeframe, with 70% paid the first year, 60% the second year, 50% the third year, etc. Joe did not have to transfer twice and his transition to retirement is seamless.

Another method for transferring firms as a succession planning strategy is to leave a big firm and go independent or RIA. It may work something like this:

Example 2
Jane Advisor wants to retire in five years. She decides to leave her big firm and transfer her book to an RIA. She signs a five-year contract and receives a smaller upfront lump sum payment than Joe who transferred to a larger firm. However, Jane’s deal allows her to receive a higher percentage payout on the assets, 80-90% on her production over the five-year period. Once her contract is up, she receives a lump sum payout to carry her into retirement, assuming she ran a profitable business. This payout can be a higher multiple than Joe received – four to six times her production. Her payout is also distributed over a five-year period of time.

While moving to an RIA was not as profitable in the short term as Joe’s move to a large firm, the benefit to Jane is that she was paid a higher fee on production for the years she continued working, and then received a substantial buyout package upon retiring.

The key to making this type of transition work for you is having a clear understanding of what you wish to accomplish. Do you have a junior partner you want to take over for you? Make sure that is clearly stated in your contract. Does it make more sense for your situation to have a larger lump sum payment, or a larger asset-based fee? Each firm structures its deals differently, so it’s important to thoroughly evaluate all your options and choose wisely.

Most importantly, do not accept any offer without first consulting with a professional recruiter! You may be leaving money on the table!

At Michael King Associates, we work with clients to identify the best succession planning strategy to meet their specific needs. If we determine it makes sense to transfer firms, we conduct a thorough review of multiple firms to identify the best opportunity for you. We then coordinate the process and the move to get you the best offer possible. Our fees are paid by the firm and do not reduce your payment/benefit package in any way. In most cases, we are able to ENHANCE your payment/benefits package at no cost to you. Be sure to call us before you accept any offer. We’re here to help!

If you’re interested in learning more about how we can help with your succession planning strategy, I’d love to have a conversation. Please email me at, call the office at 212-687-5490 or call or text me at 917-747-4805. At Michael King Associates, we specialize in helping advisors find their ideal place and achieve their best career path. We are your go-to “MATCHMAKERS!”

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