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Sep 19, 2018

During this installment of The Confident Advisor Practice from the Horizon Advisor Network, hosts Bill Bush and Pete Bush interview Dan Mayes, SVP Succession Planning and Business Acquisition at Cetera Financial Group.  They define and discuss continuity and succession planning.  They also define 4 common challenges that advisors face with succession planning as well as a process for creating a plan.  The episode concludes with an overview of Cetera’s new “Legacy Builder Program”.


Time Stamped Show Notes:

  • 00:54 – Defining what “continuity” is: how your business continues in the event of an unplanned circumstance such as disability or death.
  • 01:07 – Defining what “succession” is: how your business continues in the event of planned circumstances.
  • 01:25 – Introducing guest Dan Mayes from Cetera Financial Group.
  • 02:19 – Dan Mayes introduces himself and talks about his current career role and background.
    • 03:03 – Dan has been involved in over 300 transactions of practices changing hands.
    • 03:49 – Since 2015, this type of transaction exceeds $43 million in GDC/Gross Revenue.
  • 04:24 – Pete points out how valuable this podcast discussion is for practice owners.
  • 05:45 – Dan talks about the state of the industry relating to continuity and succession.
    • 05:47 – Continuity planning relates to an unplanned exit (death or disability).
    • 05:56 – Succession planning relates to a planned exit (typically retirement).
    • 06:10 – Dan introduces “business acquisition” as the buy-side of these transactions.
    • 06:15 – Continuity, succession and business acquisition are related, but need to be looked at separately.
    • 06:45 – At Cetera, 30% of advisors report having a written continuity plan in place.
  • 07:48 – Pete points out that many people might think that having their children in the business or having had conversations will constitute a continuity plan.
  • 08:20 – Dan explains that verbal agreements are unenforceable. Written documents are crucial
  • 08:54 – Discussing the “graying” of this industry
    • 09:00 – The average advisor at Cetera is just under 60 years old and industry average is in the mid 50s. This means that the need for continuity planning will increase over the next 5-10 years.
    • 11:01 – Dan references the challenge of creating a career path and profession for the next generation.
  • 11:17 – Defining and discussing the challenges that advisors talk about in assembling a continuity plan.
    • 11:30 – Financial Planning Association Article – 4 challenges to succession planning.
      • 11:48 – Strategic: who is the right successor?
      • 11:59 – Personal: what am (the advisor) going to be doing in retirement?
      • 12:09 – Structural: how to optimize your business for succession?
      • 12: 21 – Mechanical: paperwork, agreements and formalities.
    • 13:19 – Solving the “strategic” challenge is typically the most common challenge.
  • 14:28 – Discussing advisors evolving into an emeritus role as part of a succession plan.
  • 15:52 – What are the other 70% doing about succession? They’re actively thinking about it and are often too busy to address succession planning.
    • 16:42 – Creating “mental images” of what retirement goals would be (starting a charity, 2nd career, etc.)?
    • 16:59 – Defining a timeline to give us time to effectively transition.
  • 17:40 – A reasonable timeline for succession planning is 3-7 years.
  • 18:28 – What are some of the potential issues/problems to be aware of?
    • 19:28 – Regulatory: are both buyers and sellers appropriately licensed?
    • 19:58 – Price: Deal structures and tax implications are often unique. Seeking support from tax and legal advisors.
    • 22:12 – Discussion maintaining consistent culture from seller to buyer (from client standpoint).
  • 23:03 – Introducing and understanding process for developing a plan:
    • 23:26 – Defining goals (as buyers and sellers).
    • 23:57 – Analyze financial resources for the seller’s new lifestyle in retirement.
    • 24:23 – Design a plan based on resources and filling gaps by planning
    • 25:05 – Implementing over time – more time equals more control
    • 25:15 – Tweaking and adjusting plan over time
  • 26:23 – Discussing Cetera’s “Legacy Builder Program”
    • 27:16 – Cetera assurance for continuity, but still encouraging proper succession planning.
  • 28:28 – Concluding Dan’s interview with a clearer understanding of how Cetera’s services benefit advisors who need succession and continuity planning.


3 Key Points:

  1. Continuity planning relates to unplanned “exit” (death or disability) while succession planning relates to planned “exit” (typically retirement).
  2. 30% of advisors have documented continuity/succession plans. It is advisable to establish your plan 3-7 years in advance.
  3. Cetera is launching a new “Legacy Builder Program” which will promise to buy advisor businesses in the event of an unplanned death or disability. However, this program ALSO allows advisor businesses to develop succession plans for planned sale or transition.


Tweetable Quotes:

  • “Dan Mayes from Cetera Financial Group is the go-to-guy in helping advisors think through continuity and succession.” – Pete Bush
  • “While I should celebrate that 30% [of advisors] have a plan, I’m also worried that only 30% have a plan.” – Dan Mayes
  • “You’re going to be exiting this industry at some point in the future. The question is are you going to control that process?” – Dan Mayes
  • “If we don’t know our destination, how can we design a path to get there?” – Dan Mayes


Resources Mentioned: