When it’s time to transition out of your business it’s vital to take a thorough approach to its valuation and have clear growth plans in place.
That is the verdict of a new study from Fidelity which suggests that investment advisors are not getting the best possible value for their business.
According to the study, what separates the best from the rest is having a strategic plan in place: 72 per cent of the top performers had such a plan ready to go: that compared to just 44 per cent of respondents overall.
Succession planning is another vital tool to success when it comes to establishing new blood at the top of the company. Among the highest performing firms, 59 per cent had already established the forthcoming generation of advisors within their ownership structure. Meanwhile, the overall rate was just 21 per cent.
It seems that having a true understanding of your business is also crucial. Among the top performing companies, 48 per cent clearly understood their firms’ values – that compared to just 38 per cent among the respondents overall.
The leading performers also knew how to assess their value: 75 per cent had specific mechanisms that incorporated demographic analysis, well ahead of the 61 per cent among overall respondents. Indeed demographic analysis played a key role – the high performers analysing how demographics affected their prospects before adjusting their plans accordingly. Some even took on clients with assets below their pre-determined minimums.
There is also a risk it seems with failing to grow younger clientele and focusing assets on ageing clients. Asset growth is dominated by new clients – they account for 11 per cent growth among the leading performers from 2011-2014.
Overall, the conclusion is that investment advisors should be looking at what their advantage is and perhaps considering a third party evaluation to avoid bias.