Novachis says that this succession issue could leave many clients and assets unserved. It’s crucial, he argues, for advisors to take steps to address the prospect of their own retirements with clients. At the same time, he says its on firms like this to innovate new ways to facilitate succession for advisors and ensure their clients remain well taken care of.
IPC has created a formalized process to facilitate succession. Call their pinnacle program, IPC can operate as a strategic buyer of advisory practices, working with the advisor to select a successor. Novachis explains that their pinnacle program involves multiple succession paths for advisors. The first, and most conventional path, involves the advisor selling their book, working with IPC to select a successor, and transitioning those client relationships. That, in many ways, follows the conventional path of succession with IPC functioning as the facilitator.
The second path Novachis explains may suit the wider trend towards a gradual retirement. For advisors who do not want to sell their practice wholesale, IPC is able to set up a phased succession plan where tranches of the book are handed over to an IPC employee advisor. This allows for monetization while the advisor retains some of their work, allowing for a more gradual shift.
The final path offered by IPC is called pinnacle growth. Under this plan an advisor would monetize their business, with IPC paying them for their enterprise value, but the advisor would continue to serve their clients and function as their advisor. The advisor would then be working under the IPC umbrella, with a mechanism to participate in the future growth of their business, while offloading some of the administrative tasks and concerns about succession that might plague an independent.
While IPC has come up with these three distinct succession paths, Novachis says that may not be the end of their menu. His team is still working up new ways to facilitate succession for advisors and help address this looming issue. Despite the dearth of younger advisors, Novachis says that it’s still a seller’s market for advisor books and the supply has not yet reached a critical mass. That is changing, however, and Novachis argues that the more advisors we see retiring the more a book’s value may drop simply as a product of supply and demand. That’s why he believes advisors need to look closely at their succession plans and consider how they wan their business to continue beyond their own work.
