Succession Planning for Your Advice Business
Samantha Hawkins: Hi, everybody, and welcome to today's episode of Praemium Advice Leaders podcast. My name is Samantha Hawkins. I'm the General Manager in the distribution team at Praemium, and today I'm joined by Bob Neill, the founder and director of Seaview Consulting.
Bob joined us recently for a webinar, which was really well received. We had some great feedback, so we thought it would be a good idea to get him back and record a podcast, covering off some of the key points. If you have some time and are interested, I'd really encourage you to seek out that recorded version of the webinar.
It is available in our on-demand recordings on the Praemium website. So thanks for joining us today.
Bob Neill: Thanks for having me.
Samantha Hawkins: So Bob, recently we did a webinar with you, which was really well received. We had some great feedback, and some really interesting points covered in this session.
We thought it would be a great opportunity to have a bit more of a conversation with you following that webinar and the questions that came out of that and talk a little bit more about succession planning, an area that many financial planners that we see are not addressing within their business.
Seaview Consulting has advised hundreds of firms in preparing their businesses for sale and has also helped many businesses prepare a formal succession plan. It's something that advice firms will most commonly think about once they've established their practice and are thinking of perhaps an exit strategy or their own retirement plan. Is that your experience with working with firms and do you think there is a better time to start?
Bob Neill: Yes, certainly that is our experience, Sam. I think we tend to have people come to talk to us when they're closer to the end than the start, obviously. And I think the problem is sometimes it's too close to the end to give them options.
We have a saying which is if you're looking at a transaction or an exit or a succession plan and you have time on your hands or time with you, you're a deal maker, and as that time truncates you become a deal taker, so I think the biggest challenge is to have them start earlier so that we have enough time to put in place a plan that gives them some options to maximise their outcome.
Samantha Hawkins: Yeah, fantastic. And something that you mentioned in our discussions is, you know, people often put it off because of the size of the job or what they see in front of them as being too big. They don't know where to start. So I know you were saying that starting is the important thing.
Bob Neill: Yeah. Yes, absolutely. I think, you know, a lot of people shy away because of the perceived complexity, the scale of, and all of the factors that they have to take into account and all of the people and things that they have to deal with. And I think part of our role as advisors is to break that down into manageable components and so that if we can sit with 'em and walk them through how it's, it's a journey.
We talk about succession being a journey. It's not an not an event. And when you break it down into its component parts and deal with them separately, it becomes a much more achievable task. So yeah, the biggest challenge is getting them, to take that first step as, as they say.
Samantha Hawkins: Absolutely. It applies in many areas, doesn't it?
Secondly, the key man risk is an issue for businesses where, you know, particularly financial planning relationships are so important in those businesses and the relationships with the client. Talent attraction and retention are then critical to successfully implementing your succession plan? Or do you think it's ultimately the client base that's the most critical factor when looking at a transition?
Bob Neill: It depends a little bit on, on what the owner's attitude is. It's certainly, you know, in smaller businesses, key person risk is, is a big factor. And if you've got time and you've got the ambition to grow the business and bring people in and train and develop them and equip them with the skills to take over the business, then that's a journey that gives you the legacy and the continuity and the benefits for your, your colleagues and your staff and your relationship people.
However, sometimes that's just not achievable. For a business, they just don't have the time. Perhaps they don't have the inclination or they don't have the willingness to go down that journey. In that instance, then the best result is to find the right home for the client book, do a transition plan and hand those clients over to a business that's capable of continuing to run the business and provide advice. So it depends a little bit on timing and a lot on attitude.
Samantha Hawkins: Yeah, finding the right people to be able to take over. Yeah, difficult for everyone at the moment to find those right people who want to stay with your business as well.
A little bit on a similar theme, I guess then, we're seeing a lot of advisers leave the industry and there's quite a lot of consolidation across firms. There's some big growth plans for those firms, perhaps looking to acquire another firm as part of their growth strategy. What should a firm be looking for from a business that they're thinking of acquiring?
Bob Neill: It's a really good question. Look, it's certainly we are heading for a period of continued consolidation. We're facing a scale imperative and so businesses are going to have to get larger to be competitive or to remain competitive. And so when we're looking at merger or acquisition opportunities, it's really important.
That you understand a few things. One is making sure that your business it is in its best possible state so that it's operating as effectively as you can run your business so that when you add something in, you've actually got a streamlined business to add it into and clear guidance on how that business will roll into yours. Then assessing the fit, so is it the right style of client? Is the investment approach consistent with what you can bring down? Is the fee comparable? Things, all those sort of detailed things, but then it's really important that you can understand what the value to you of that merger acquisition is it's no point ringing Bob Neill and saying, Oh, what a business is going for in the marketplace. You actually need to go through an analysis and understand what that business is worth to you in your business. So if I rolled that business in, what am I going to take out of it and what's the benefit to me and how do I value that?
So really understanding value to you in the first instance and being able to properly understand how that business is going to align with you are the critical factors.
Samantha Hawkins: Great. That's interesting. Thanks, Bob. You've worked with a lot of businesses, as we've said, and if you listen to the webinar, you'll, you'll hear a little bit more about that.
What is the one thing that you find most challenging when you're working with business owners on their succession planning?
Bob Neill: The most challenging part, as I mentioned before, is actually getting them to start, actually getting to sit down with us and talk to us about what they're looking to do, what do they want to achieve personally in the first instance, and for their business in the second instance. If they sit down and can articulate that, then we can relay back to them a plan or a strategy or a set of approaches that will enable them to achieve those outcomes. So that's probably the most challenging. The second issue is having them understand clearly what their business looks like through an independent eye. So we can sometimes have a distorted view of our business because we're not looking at it with the eye of someone who's taking a critical view of it or an objective view of it.
And we can get we can get quite precious. We quite often don't realize when the baby's ugly.
Samantha Hawkins: Yeah, absolutely. It can be quite confronting. No one wants to be told they have an ugly baby. Very confronting. Yeah, that's a difficult part of your job, I'm sure, trying to get business owners to, you know, be a bit more realistic with their, ideas of what their businesses worth.
What advice would you give to someone who is early in their career, early in the stages of setting up their business, when it comes to succession planning, and how would that differ from someone who's approaching retirement and the end of their career?
Bob Neill: I think anyone who's starting out has an opportunity to shape a business that's ripe for the future. You know, if you're starting a business today you're probably going to take a very different approach to a range of things in that business compared to a business that's been operating for many years and has legacy issues and is constrained by things that they've done in the past.
And so I think for younger people starting today or starting a business, start with the end in mind, okay? If you do have a view of going, I'm going to build something that's valuable, I'm going to realize that value at some point in time, or I'm going to make my business attractive to someone down the track, then build it knowing what other people perceive as valuable in the marketplace and for your business and shape your business to do that.
And think about, you know, are you a person or a group of people who want to encourage participation in your business by others? If they are, what skills are you looking for maybe the skills you're deficient in or the skills you want to grow and still diversify. So I think the advantage you've got when you're starting is you can shape the outcome much more easily than if I've got a business that's been running for 20 years and I'm going to have a range of legacy issues because our world has changed so much.
And so changing the shape of that's much more difficult. So I think my, once again, I think probably a common theme around here is, you know, the earlier you start thinking about it, then the better outcome you're going to get.
Samantha Hawkins: Yeah. More control, better outcome for everybody. Excellent. Thanks again, Bob, for joining us.
It's been great talking to you, and we hope to have you back on another webinar again soon.
Bob Neill: Sam. Thanks for the opportunity. Appreciate it. Take care. Thanks, Bob.
