The RIA Succession Paradox: It’s About the Brand

By Joe Anthony

March 4, 2014

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Registered investment advisors (RIAs) rise to success based on their abilities to attract talent, build referral networks, see emerging trends and cater to a market. In their prime earning years – say 45to 55 – they are the central force in their own success. And there lies the paradox. A younger, more dynamic generation is better suited for running your firm.

According to FA Insight, 25% of financial advisors will retire within the next decade. Yet only 29% of advisors have defined or implemented a succession plan, according to a Moss Adams study.

No doubt, lack of planning places a large portion of a firm’s value at risk. An owner may have spent a lifetime building equity and now risks destroying it because of ego or short-sightedness. Call it “the succession paradox.” The very skills that lead to success can thwart an RIA’s ability to thoughtfully plan and maximize the value that can be ultimately extracted from the business.

Branding is essential to the long-term equity of an RIA. Too often, brand building is relegated to short-term, current marketing efforts. Branding is seen as a simple response to an immediate need to build awareness, referrals or a sales pipeline and win assets under management. But a brand is something much more permanent and valuable. More than any other factor, it outlives the productivity of an RIA, creating value independent of personal networks, effort and market presence.

A brand – and brand building – is the most overlooked component of succession planning, an after-thought where goodwill is rarely fully realized.
Don’t let that happen. Here are the keys to building a brand that safeguards and enhances equity at the point of a firm’s sale or succession:

  1. No one cares about your name. It’s the value of the organization and its brand that truly counts. Separate your business brand from you the person. The overuse of a principal’s personal name in the firm’s brand suggests intimacy that undermines scalability. The preponderance of owner-named RIAs dates to a brokerage paradigm that allowed captive brokers at wirehouses like Morgan Stanley to create their own teams. It really has little value in the succession equation. Ratchet it down or phase it out. Use naming options that promote the entire enterprise – not just you.

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