EP13 - Sell the firm, or hand it down?

Two doors on succession. M&A — sell to a roll-up, take the check, walk away. Or apprenticeship — bring someone alongside you and hand the relationships forward.

In this episode, Steven Watts and Founders Financial CEO Brad Shepherd unpack the two dominant paths advisors face when planning succession. They explore the operational, financial, and emotional risks at stake, the difference between exit planning and legacy planning, and why a gradual, proactive approach almost always beats a reactive one. The conversation lands on a central question every advisor must answer for themselves: is this about maximum economic value, or continuity of care for the clients you've served for decades? Brad closes by sharing how Founders blends the strengths of both models through its Strategic Enterprise Program.

More from Founders Financial: 

Strategic Enterprise Program: (the apprenticeship pathway): https://foundersfinancial.com/strategic-enterprise-program/

LinkedIn: https://linkedin.com/company/founders-financial

© 2014-2026 Founders Financial. Member FINRA/SIPC and Registered Investment Adviser. All Rights Reserved.

Transcript

SPEAKER_00 0:00

From Founders Financial, this is the Build Five and Four podcast. Partner-to-partner conversations for independent financial advisors. Today, host Steven Weiss, Chief Growth Officer at Founders Financial, sits down with Brad Shepard, CEO of Founders Financial, to discuss MA versus apprenticeship and the one question that should drive the choice. Two doors on succession. MA. Sell to a roll up, take the check, walk away. Or apprenticeship. Bring someone alongside you and hand the relationships forward. Here's the conversation.

SPEAKER_01 0:39

All right, good morning, and thank you all for joining us for today's discussion. Uh happy to have everyone back if you've been on these previously. Thanks for joining us again. Um, we have what I think is a is a really great topic today. It's focused on helping you, the advisor, find and build the right succession strategy for you. And specifically help you determine whether or not it's better to pursue an MA exit strategy or to develop an internal succession strategy through an apprentice that's going to take over and guide the practice while ultimately preserving you and its legacy. So really excited for today's conversation. But before we get to that, uh I want to welcome back a friend and colleague, the CEO of Founders Financial, Brad Shepard. Uh Brad's been a guest on the on this series before, and I'm super excited to have him back to help lead this discussion, especially since he's been part of so many of these discussions within founders, spending over three decades working directly with advisors to help them grow and eventually find the right path when it comes to succession. So, Brad, welcome back and thank you for joining us.

SPEAKER_02 1:47

Yeah, thanks, Steve. It's uh it's an important topic and an important time in our industry. It grabs headline news all the time. And uh anything we can do to help uh independent uh advisors think about uh this topic, which is critical, I'm I'm happy to be here and looking forward to the discussion today.

SPEAKER_01 2:05

Yeah, absolutely. Um, so Brett, you know, there are a number of challenges that you know advisors face today when it comes to succession, right? You know, there's a lot of studies out there, you know, one notably that suggested that over a third of practicing advisors who are you know likely going to retire within the next 10 years, they don't have a planned succession strategy. The industry is kind of gearing up for a pretty disruptive period over the coming decade, decade plus, right? So I believe it's it's fair to say that practices and the teams within those practices and clients, they're all kind of staring down the possibility of a lot of change, potentially a lot of turmoil, and negative impact if the advisors that are in charge and leading their practice today, if they're not beginning to prepare for what this next phase looks like, for not only themselves, but for all those groups that ultimately depend on them. So um it it it raises this fundamental question is it time? And we're gonna talk about that, right? But the question, at least the way I'm thinking about it, it's not necessarily about whether it's the right time for succession. We have uh touched out on a topic in previous discussions. So if you haven't checked those out, please go to our website. You can see a lot of those. But I think the question is that for for this moment, for the today's discussion, is it the right time to start thinking about planning, right? Not whether it's time to get out, but is it the right time to start thinking about planning? To kind of put a spin on an old adage, the best time to start planning for succession was was probably yesterday, right? And and the next best time is today, right? So that's a phrase that's been used in a lot of different contexts, but I think it ultimately applies very well here.

SPEAKER_02 3:49

Well, and if you think if you think about it, Steve, along those lines, we promote to our member partners here at founders, right, that uh the work they do is important in the context of client relationships. And what do they teach their client relationships all the time? That is start now, start early, so that when you get to the point when you want to actually do the things that you hope and want to do, you're able to do them. I don't think this is any different. And this is one of those situations where um, you know, advisors need to really consider their own plan, not just their succession plan, their financial plan, all those kinds of things so they can be ready for the day, uh, whether it arrives as they want it to, or it arrives because they need it to. And that's a big part of this as well.

SPEAKER_01 4:25

Yeah, well said. So, so Brad, with all this in mind, and hopefully that's set up and teed up the conversation. Um, can you share your thoughts and kind of get us going on the timing for succession planning and how advisors need and can confront the challenges that they're all gonna face at some point. At least I would assume they would all face at some point.

SPEAKER_02 4:47

Yeah, no, it it it is I I think that the the whole point of this conversation today, the challenge of succession, is a critical topic. And as we as we lead conversations with advisors uh through this lens, uh, we realize there's kind of three significant uh points that that they need to consider. Uh, and they need to consider it strategically and holistically before they begin to dig in, right? And and that is one, what's the right partner for their practice? Two, how do they grow uh advisors that will be capable of handling the client relationships and carrying forward the excellence of that advisor? Uh, and then what's the what's the plan? What's the right strategy to follow? And and uh if you think about that in a holistic way, it's this idea of an internal partner or an external partner. It's the idea of a personal transaction monetization succession strategy or an arm's length one. Um it's who do you want responsible for building uh the mindset, the philosophy, the leadership skills, uh, the acumen, the caring of the next generation advisor in a practice? Do you want it to be your responsibility as the person selling and leaving? Or do you want to leave it to an external party to kind of, and I'll say it this way, and you'll, and this will lend to some of the biases certainly we share here at founders, but the mercenary advisor is going to come in and just take over relationships, so to speak. And then what's the right strategy? Um, do you want to put yourself in the position as an owner of an independent practice that is a planned, um, orchestrated, um, you know, getting the dance steps right on the dance floor kind of process? Or do you want it to be reactive where things and choice and control leave you because you're forced to now react to environments that you're not in control of anymore because maybe you haven't thought about it early enough or the right way, health-related, market-related, uh who knows what other things could be. But and so it's it's starting the conversation about what are the challenges and examining these three kind of big points to get the an independent advisor to consider what's important to them about these different methodologies of consideration.

SPEAKER_01 7:01

Yeah, I know we're gonna get into this later on, but you know, uh, the the the further ahead you get, right, the more planning you do and you you take away some of the reactive, the more optionality you're gonna have, right? I mean, you get to a point where you know it's maybe too late, your options are gonna get less and less, and you're gonna be kind of stuck to go on maybe a certain path. So that's that's what we're gonna get into today, and it's gonna be I think a fun conversation.

SPEAKER_02 7:23

Yeah, and and I I I asked you to keep this one here again. You know, it is this age-old difficult question. Is it time? And and to me, it is amazingly difficult. And and as I think about succession for an independent advisor, um, it's actually the the second most important decision they're ever going to make. The first being, do I go independent? Do I build and grow my own practice where I can put all of me into something? Let it become a representation of my heart, my my philosophies, my acumen, all that kind of stuff. Um, but ultimately, I always envision this day. How does an advisor pick up the phone and call a client and say, hey, hey, Steve, it's Brad Shepard. I'm the, I'm calling, I've been your advisor for 30 years. Hey, I want to thank you for having paid me enough fees and commissions over the years that I don't need to work anymore, so I'm going to retire. Uh, good luck with the next advisor that comes and serves you. Because so what so what makes this question so difficult isn't, is it time economically, financially, all that? We'll get into those things. But is it time in an advisor's kind of soul a little bit to be ready to hand the reins over uh to a relationship that they've cared for and served in many cases for decades? Uh, these people have become family, friends, um, and and deeply personal to them. How do you do that? Uh, and that's why in the conversation today of MA versus versus kind of apprentice is such an important one for advisors to consider uh in the context of the legacy of care they create through this through this uh succession transaction.

SPEAKER_01 8:51

Yeah, it kind of just kind of hit me there as you were talking. It's like, you know, you might spend tens of years, right, decades with clients, right? You've seen them at a very young age, and and you know, you've watched them mature and their families mature, and you you've guided them through that process financially and and maybe in other ways as well. It's almost like finding the successor is not just for you, right? It's for them, right? It's part of the financial well-being that you're you're stewarding them with, right? And that's because if if you leave them in a in a bad spot because you decide to move on and you know, obviously do your own thing later on through retirement, you know, they may not be as protected as they once were. So it is care for your clients and your client relationships well beyond your time, even just at the practice.

SPEAKER_02 9:38

It it's about the promise we make, right? As advisors to serve and care, do to them as we would do to ourselves in the same circumstance, the golden rule type stuff. And uh yeah, um, and having watched advisors go through this, the complexity isn't the transaction at the end of the day. That's the blocking and tackling of all this. It is all the other stuff that makes this, you know, such a difficult question. Is it true?

SPEAKER_01 10:00

Yeah. So, Brad, because of the the you know, the inherent risk and the associated challenges with navigating the the succession kind of gauntlet, right? I I would venture a guess, and you can keep me honest here and correct me if I'm wrong, to say that a lot of advisors, they they kind of kick the proverbial can down the road a bit, right? Um, maybe choosing not to deal with it when maybe they should, choosing it, you know, to like I say, kick it down the road a little bit and deal with it at a later time. I I don't want to make a general blatant statement. I don't think that applies to all, right? But certainly, um, you know, certainly some and probably a good amount. But by doing so, I would imagine that opens up all new sets of issues and makes for kind of what we're just talking about, uh a kind of a chaotic situation at the planning becomes more reactive as opposed to proactive, like you were talking about. Sure. Not to mention, um again, I'm I'm taking a bit of a guess here. You keep me honest, that waiting too long probably impacts the eventual value of that practice, right? Not you know, the care is concerned, but waiting too long, maybe your options get less limited, and maybe that's impacts the value. But give me your thoughts, give us your thoughts on how the advisors that are you know tuning in and listening, how they should be thinking about the risks and challenges that are going to be present throughout this process.

SPEAKER_02 11:21

Yeah, and I think it's the right way to start the conversation as we dig into the into this today, is to put context around what are the issues of succession, what are the challenges, what are the risks, uh, and then we can and then we'll move into later in the conversation, obviously the kind of pros and cons and goods and bads of the the mergent acquisition approach versus the grow it grow it within approach. But um, I I think we when we think about uh the challenges one faces, they they range from operational, financial to uh any any number, philosophical readiness, a bunch of things. But when we think about um the blocking and tackling of succession, what the future advisor, the future organization needs to have in place is to be able to continue to operate on a daily basis effectively, right? And so um navigating the operational challenges through this process is one of the bigger risks, one of the bigger challenges faced uh through succession, whether it's an MA approach or an apprenticeship approach. And so what we what we encourage advisors to think about uh are are these things, you know, gradual transitions so that things are are worked on a little bit at a time, if that makes sense. Um so we empower the next generation advisor a little bit at a time. We prepare our internal team for leadership change a little bit at a time. We onboard to the client relationship things strategically a little bit at a time so that they're so that the um the sudden risk of a of a reactive change is managed through this gradual context, this gradual process, if that makes sense. Um because by doing it gradually, what's that?

SPEAKER_01 12:55

I I would not mean to cut you off there, but I would imagine that a good partner in succession with you, whoever that might be, they're gonna be along, they're gonna be with you along for the whole ride, right? They're not looking for a quick in and out, right? They they're they're more than happy to be with you through this gradual, probably very multi-year kind of phase and process.

SPEAKER_02 13:17

That's spot on. And so the idea of gradual, which will be a theme that we'll we'll speak to today across this whole discussion, is that then it minimizes risks of the of the seller as it relates to the buyer and the financial risk during buyout and the successors risk that the business doesn't perform as well. It reduces the risk of emotional challenge because people are more bought in a little bit at a time versus it's thrust upon them suddenly. Um, it promotes clear communication. Um, and it it it that by itself renders everything easier. And and so, founders and our role as we help advisors do this, it's then this external mentoring that we participate in with an advisor to help them think about all the things that are um, you know, they may not be thinking about at first blush because they're focused more on the blocking and tackling. How does the trade get done? All these kinds of things, but so much more dimensional than that. And so navigating operational challenges is critical. And the key point is to do it in a gradual way over many years, which again, uh the our biases will come out through this conversation. A gradual approach, which means a pro prepared, proactive approach versus a sudden reactive approach for succession is critical.

SPEAKER_01 14:32

Yeah, I totally agree.

SPEAKER_02 14:34

You know, continuing on, you know, what does that then minimize? Uh it minimizes financial risk. Um, and and internal succession planning, we believe, also minimizes financial risk if you do it gradually. But equally, you know, internal succession planning can add some risk, you know, because the successor advisor is now taking on significant debt typically. Um, you know, most junior advisors that are ready to become the future leader of organizations and client relationships, you know, they probably don't have personal capital to buy out uh at first blush uh then the financial uh growth and value of the entire enterprise. And so um and so doing this again in a more gradual way helps the successor advisor be more prepared to succeed, which then means that this the debt that they're taking on and the risk they have to make payments is more balanced, if that makes sense. Um, and so when you further think about financial risks in in this planning, it's making sure the valuation is fair and appropriate. Uh assessing things like how capital poses challenges for successors, securing it. Is it personal? Are they going to a bank? Is the seller taking a uh a personal note to finance this transaction ultimately? Um and then keep it in mind that poor market sequence, you know, most of these businesses are recurring revenue businesses, and so uh, and those recurring revenues are tied directly to market performance and investment performance. And so, how does poor sequence of returns create pressure on the successor financially? These are things that the retired advisor needs to consider because the reality is this um the they are a financial partner to this enterprise until the last payment, if that makes sense, right? And so as we get into the idea of MA versus internal succession partner, um, these are things that a selling advisor needs to consider about what's most important to them and the risks they're willing to partner with. Um my personal belief is that they should be and want to be connected to this successful thing long term because that's it's the legacy of their of their uh whole whole lifetime of work. So yeah.

SPEAKER_01 16:39

Yeah, I'm I'm really glad you kind of dug into that a little bit because I I I have wondered and and thought to myself, you know, is maybe the reason advisors maybe shy away from the internal apprenticeship approach, right? Is because maybe they just don't believe that the the younger advisor can secure the capital to get them the value they want. So in their mind, whether it's it's real or or perceived, uh I wonder if that's a barrier that that exists in their mind that says, you know, I'm not even gonna bother with that, they can never afford the business, I'm never gonna get the full value I want out of it. So let me just go the other path. And what you're saying is, well, yeah, that is a risk. That for sure, that that might be true, but it's only true if you if you aren't planning for it over the long term. If you give the successor and the apprentice time alongside you to work out those details, hopefully with a partner that can help them in that process, right? Then that becomes a reality that is actually achievable, actually doable.

SPEAKER_02 17:36

Yeah, no different than uh themselves as enterprise owners building the practice over many years, right? Um and so uh yeah, I I think that um the uh ability of a of an advisor retiring to be um tied into the legacy of their care for many years is a is personally, in my lens, a good thing. Um it's not a necessary thing, and we'll get into that conversation in a little bit, but it's a good thing for the client relationships, it's a good thing for the advisor that's now taking over, uh, even in some cases the team that's staying on to care for that advisor going forward. Um but I do I do think um that uh advisors that want uh their legacy as a focal point of this situation and not being rolled up into a bigger entity uh where the client becomes more of a financial outcome than an impact outcome. I think it's something they need to get comfortable with. And that, again, that's a gradual process as well of trust and confidence of the ability of this uh you know younger advisor to lead and take care of this thing going forward. Yeah, great point.

SPEAKER_01 18:39

Uh Brad, we we've said this a few times, but I'm gonna hammer it home because I I think it's so important, right? That succession planning, it can't be reactive by design. It has to be proactive. I mean, you kind of allude this earlier. Uh advisors, you know, you're you're guiding your clients, right? Brad, you're you're so you you were practicing advisor for a very, very long time, still do a little bit to this day. Um you're you're guiding clients with long-term financial plans, right? You're you're asking them to think long-term, not short term. It makes sense that advisors would follow that same advice, right? I mean, it's like the you know, you you eat eat, you know, uh what's the what's the phrase? You're uh eat your cooking, right? Yeah, eat your own cooking, right? You know, uh so you think that you follow that same advice, especially at since whatever the outcome of this financially, that's gonna be a large portion of their own retirement fund. At least I would imagine it would be. Yeah.

SPEAKER_02 19:28

It's a significant asset.

SPEAKER_01 19:29

Absolutely. Huge, right? So but it it can be hard to know when to walk away. And and there are likely signs that exist somewhere in the the journey of that advisor's time at their practice that planning really needs to start if it hasn't already. So, can you share some things that advisors they need to be on the lookout for in their own thoughts, their own feelings, their own activities that may give that that that blinking signal that it's really time to start thinking about what succession is is going to look like. And if that process hasn't already begun.

SPEAKER_02 20:03

Yeah, no, it's it's a it's a great question. And I think what makes it a great, a great discussion topic is I actually think most advisors really love what they do. And so it becomes hard to assess effectively when it's time to start thinking about it. And so hopefully these are just a couple of ideas that um you as advisors tuning in today, listen to this in the future, you should ask yourself these questions so that you can begin to assess is it time to really begin to start thinking about this? Because maybe something, whether subtle or significant, is shifting and changing. And and uh having been at Founders now for almost 30 years and helped countless advisors navigate this, uh, as you know, Steve, our strategic enterprise program uh that we work with advisors on does an incredible job of helped them think about their journey, right? Um, them as their products, them as leaders. And so uh every every uh every everyone has their day ultimately. And so, you know, as an advisor, my advice to you is to begin to ask yourself these kinds of questions. Are you feeling burnt out? Um, is there a natural retirement age that you've kind of dreamt about? Um, are you starting to uh and this is not an uncommon one, I think even for young advisors, are the administrative burdens starting to outweigh client interactions? And please tune in for further conversations with us on these topics about how to grow impactful practices and free up time to grow and scale your practice as an advisor and do the things you love the most. We've got plenty of wonderful conversations on that. You know, it's it's the idea of preserving legacy and recognizing that as we get older, tomorrow ain't promised to anyone. Uh, you know, we see it with founders all the time, advisors getting kind of bored by the industry a little bit. They're just they're just not interested anymore. Um, and and ultimately it comes down to this it's this idea can you look in the mirror every single day and say, not that you're just you're satisfied, but are you in? Love? Are you feeling great? Are you happy? Are you fulfilled by what you're showing up and doing every single day? And when you have those things, there's never this question of not caring to invest. There's never this question of not feeling compelled to do the little big things. It's you're always, you're all up and in it all the time. And you've got this energy and you've got this, you know, you're making an impact and you're and you're just you're you're loving it. Um, but it's it's critical. And there's no right age, there's no right moment. There's just, if you're starting to feel this, you got two paths, right? It's reinvigorate the leadership message and the falling in love of what you do every single day. Or guess what? It's time to start having that proactive planned conversation about what the future might look like. Um and I'm proud the founders do a wonderful job in both scenarios, helping advisors contemplate their um, you know, their existence a little bit. But yeah, critical, critical stuff.

SPEAKER_01 22:52

Yeah, it it's probably not a great, you know, apples to apples comparison, but I think it's close enough to kind of say it it's it's like the athlete, right? Who it's all they've done. They they really love what they do, they love being a professional baseball player, football player. And it can be hard to kind of know when to walk away. But once you start thinking about retirement, it's probably starting to think, start, really start planning for that, right? I mean, instead of hanging on too long or or whatnot. But yeah, right. It feels like succession has this potential to be this all-encompassing period of time that can become overwhelming if if the advisor is not ready, right? And it would be easy to get caught in a moment where the advisor is is in a situation where the the deck, right, when it comes time for succession, when it comes time to move on, that that deck is no longer stacked in their favor, right? They didn't plan early enough, they're short on time, they need to move on for whatever reason, right? There's any number of reasons why someone needs to move on, and exiting becomes more important than succession, right? So all this would seem to benefit, it's kind of what I was alluding to earlier, and we kind of kicked off the the show. All this would kind of kind of uh allude to the fact that the the buying party in an MA situation, like they could be in a in a better position, right? Because the advisor is kind of stuck in a limited negotiating position than they would have been if they would have started a little bit earlier. Uh, not to mention the the negative impact to clients potentially go up. Um, a consideration that, again, if I'm on the other side buying, that probably is a factor in the purchasing terms, right? So I I assume I have all that right again. Check me if I don't, but that's that's kind of my assumption. So if that is the case, what should advisors ultimately be focused on when they plan for succession so that they don't fall into the type of situation that I just described where they're they're trapped?

SPEAKER_02 24:46

Yeah. No, it's it's again, it's it's the eat your cooking conversation. You know, do for yourself as an owner of business the same thing you would help your business iron clones, your business owner clients do for their plumbing shops and their you know their hardware stores and uh their car dealerships, you know, all that kind of stuff. But it's it's these key consideration points. And uh, you know, you can see them right here. Find the right partner. Is it an MA transaction? Is it grow from within? You got to know that earlier on. And that's part of what do you want for your practice ultimately? And we'll get into some of the pros and cons in a few minutes of MA versus internal succession uh and why that's important to get to kind of determine early when it's all said and done. Um, and and then understanding that um the whole idea of succession isn't just having a client work with you one day and work with another advisor the next day. It's much more dimensional than that. Um, systems, technology, people, processes, workflows, um, spirit, uh, policy manuals. I mean, we can go on and on and on. Uh, you know, as you know, in our SEP program, we help advisors measure their levels of maturity with 53 different areas of what it takes to own and run a purpose-rich servant-led financial planning enterprise. Um, so how have you considered all 53 areas of the practice when you're going through a succession uh process? Uh, and it's why it is so much more than just uh the retiling of an account under one advisor to another. Um, it's this it's this idea of readiness versus immediate transition. Uh and, you know, uh I'm pre- I'm preaching the choir. No one would think uh otherwise on this call. I'm sure that you just you snap your finger and this happens. Uh this takes in many cases years to prepare for. Um, because ultimately the the client does have a choice. They don't have to uh accept the choice you make to who you sell to, who you have succession be with. They get to they they get to make their own decisions, do they go find another advisor or not? And that's why this is a multi-year process where readiness is a critical component of all this, um, which is then the difference between exit planning and succession planning planning. The the idea of monetizing something versus caring for something through this through this process. Uh and so as an advice, go ahead.

SPEAKER_01 26:58

Yeah, let's dig into these key components for each one and uh kind of take us through what what these these three are and and give us your insights.

SPEAKER_02 27:06

Yeah, so in the context of valuation, uh let me just tell you what I believe from the years I've been working with advisor on this front. I believe that most advisors want to maximize the impact and care of the succession and not the value of the of the of the practice from a money perspective. That doesn't mean they don't want good value, great value, fair value for what they've built, owned, and created. But ultimately, they understand that the promise they've made to the people they serve is the most important thing. And so the so valuation um has to be considered through that lens. Uh and in any transaction, uh, and I don't care if this is an advisor practice or buying a car, you know, probably you know you've gotten the right valuation if both if you feel like you've been underpaid and the set the buyer feels like they've overpaid a little bit, right? Uh and that's and that's a nuanced thing. But the good news is we have pretty good industry standards around measurement points and metrics and multiples and all that kind of stuff that we can begin to uh benchmark and earmark to. Um and then it's ultimately it's a financial transaction. Does the business that's being purchased have enough revenue and enough uh profitability to support the growth and sustainability of the practice beyond the advisor? And then the payments and all the kind of things to the advisor. Uh, and so it's really important to get valuation right. Um, and and then for an advisor who's moving towards this to maximize value, it's how do you instill passion? How do you instill leadership? How do you keep clients wanting to stay so they don't they don't walk away because ultimately attrition will affect not valuation at the beginning, but it will affect at reset points in the future what they'll continue to be that the price will continue to be valued at. Um and so I just do believe that um there's a there's a uh idea of fair value, not max value. Uh and fair value means that it's just so much more likely that the financial risks we talked about earlier are mitigated both for the purchaser and for the seller ultimately.

SPEAKER_01 28:57

Yeah, great.

SPEAKER_02 28:58

And so then you move it into so now we've got to, you know, everyone's feeling good or maybe not so good, which I don't think is a bad thing about yes, what this is what it's worth. And then how do you make sure the clients say yes? Because again, they got to vote in all of this. Uh and so retention strategies are critical, uh, which is driven by, you know, timing, communication, uh, the proper gradual handoff of leadership over many years, uh, and and understanding that the single most important thing every advisor should be considering through this is how to preserve the relationship. Uh when it's all said and done, clients haven't stayed with an advisor because their performance is necessarily the best, their plan is necessarily the best. I'm sure it's all really good. They've stayed because they believe in the advisor, they trust them. Uh, they've been they've granted the advisor authority in their lives. And so done right, attrition becomes non-existent. The things, the the succession plans we've helped advisors do. Um, the most recent one, we just had a two-year attrition true up. Um, one client had left over the two years, um, which means that the seller retained full value of the transaction, if that makes sense. But more importantly, we know by that outcome, the clients felt served properly uh over that time period as well. And end up being now a win-win-win. A win for the clients because they're cared for properly, a win for the seller because the months, the value has been protected, uh, and it's been protected because the win of the of the succession advisors, they've carried care on the right way. And now they've got a continued strong base to grow the practice from in the future. And then the last point is just have a great plan, right? Uh, and and then, you know, certainly an advisor could do it themselves, um, but my recommendation strongly would be to find the right partner to help you with uh the plan of implementation. There's a lot of complexity from uh financial formulas and and operational transition, legal, legal documents have to be signed. And so and so again, this gradual approach, which we're promoting on the call today, is the idea of then balancing the between the current business needs and the planned succession needs that uh make this thing successful ultimately. Um and so having the right team both in your organization form the right way, not just the advisor, but the whole team. So there's buy-in and then partner with the right team externally to navigate all of this stuff is really, really important. No different than again, a client hiring an advisor and a group of people to serve them.

SPEAKER_01 31:18

Well, Brad, you you've been um kind of teasing this out in the conversation so far. So let's let's get to it, right? I think we've done a good job setting up the the scenarios in in the existing world. So, you know, we've talked about both of these uh these scenarios, you know, selling your practice and having it you know be consumed in in a roll-up, as well as the internal succession strategy and developing the apprentice. So let's dig into these areas. You know, on the surface to me, you know, one may seem easier, right? If that if that word makes sense here. Yeah.

SPEAKER_02 31:51

That might be a perception for sure.

SPEAKER_01 31:53

Yeah, for sure. Um, but risks and like and legacy, risk to legacy and continuity are are certainly big factors in that. Um, while the other seems like maybe more planning is involved. And you know, again, keep me honest here. But the protection of the advisor's clients and overall continuity may be better better taken care of, right? So you're gonna you're gonna correct me on those things and make sure, you know, uh you know you keep me honest on that. But now that, you know, uh that's all probably way too simplistic the way you think about it. So can you dig into these areas and let's shine some light on both of these options? Where should advisors be leaning? Is one truly better than the other, right? Or is it really just a matter of circumstance and and what ultimately is important to the advisor?

SPEAKER_02 32:39

Yeah, I'm gonna answer that question first just from and I'm uh with perfect transparency. This is my biased view, right? So having watched um both of these kinds of transactions take place over time, and I love the questions the way they're written, because yes, the bias that we've always promoted is an internal succession strategy with an apprentice is the best outcome for all parties involved. Um, I've just watched um the the sell roll-up strategy um take place. And in some cases, advisors stuck around, in some cases they haven't. But what I've generally heard, um, and I could cite certain specific examples I won't go on the call today, is that there's just dissatisfaction when it's all sudden done because the the large entity that's been rolled up into does see it as a financial transaction and does see the client as a financial outcome to that to that transaction. So, but that doesn't mean there aren't you know legitimate facts and and reasons why an MA approach should be considered and and why there's legitimate facts why internal succession should be. And so uh I think the the you hit it on the head a minute ago. The MA approach, I think, is the proverbial easy button, right? It's that I just don't have to think about a whole lot. I can I can plan less in advance, I can be more reactive. They've got giant teams that are gonna come in and swoop in and do all the due diligence, do all the financial analysis, do all the demographic assessment. Um, we're gonna send, there's gonna be a day this thing goes live. I'm gonna send letters out, uh, let clients know, and and you know, advisor number two, three, four, five, and six are gonna show up and start, you know, start being an advisor in these relationships. And human nature, which is why this works, is people don't like change. And so if I'm the client, I just kind of accept the outcome. Um, I'm not necessarily thrilled about it. And it might be two or three or four years before I finally take my my opportunity to vote because the experience I've had in leadership and care of that new advisor is just so much different than what I had in a trusted, intimate relationship with my previous advisor, um, that uh they they end up walking. But by then, grow enough growth has taken place in the firm that it didn't matter from an economic perspective. And so uh and so, yeah, so facts of MA, it's easier in theory. I I don't necessarily believe it, but in theory, um maybe some enhanced financial terms because um there's there's less need by these giant organizations to uh protect their financial interests a little bit as the buyer. Um, whereas in the in the internal succession, you you as and as the seller want to kind of protect your future, uh, the ability of that advisor to make those payments ultimately. It's just less emotional. Um, you know, but and but and I think this is the key point. The advisor gets to go sit in the passenger seat. They just get to be told what to do and and how to do it and when to do it. And that doesn't really matter their whole opinion a whole lot. Um, they just get to go sit back and and have this more impersonal financial transaction where they can kind of just wipe their hands, walk away, and and and be done. Uh, I think in those situations there's incredible higher risk of client attrition, uh, which is because the experience is so fundamentally different. Why? Because now uh to get the accretive value that the big purchaser wants through the MA approach, they're gonna they're gonna force into that business system some technology changes that are required, uh maybe potential differences in planning and investment management philosophies, even platforms and cost structure that, again, most clients might just surrender to, but it again, it puts more at risk of of those kinds of things. And then I think bottom line is this, which is why my bias has always been to you know the uh more internal succession approach, uh, and that is company culture permanently changes. Uh, and that's just a fact. Uh, there's no way that um a bigger organization comes in and it becomes a more personal experience for that client relationship. Um, and so the bottom line is the client experience is oftentimes diminished. Um, doesn't mean that they can't be served well, doesn't mean that that new organization doesn't bring great perspective, intelligence, expertise, leadership, all that to help them achieve their plans. Um, but the bottom line is the motivation for what this advisor's built over 20, 30, 40 years, it is different now. Um, because you know, these MA bigger shops, they have an economic quotient they have to hit. They're owned by private equity, they're publicly traded, they just have a different way to manage and assess ultimately.

SPEAKER_01 36:38

Yeah, that's right. I mean, MA and and you you can take this out to other industries, is is often defined by the synergies and economics created out of them, right? So it's maybe no different in this situation. So let's let's then turn the page to um to the to the apprenticeship approach.

SPEAKER_02 36:53

Yeah, and and again, you know, even though you know, in full candidate, this is our bias um because of the the the quality of relationship we think is so important, all this, this isn't necessarily the best approach either. I mean, we're not trying to say one's better than the other. It's it's each advisor's got to make that decision for themselves. But I do think there are facts that that need to be considered. And and in the context of of a of a build it as you grow the right person strategy, uh, internal succession, uh, you know, the idea that you get to impact the mindset and purpose, the the calling, so to speak, of that succession advisor is really a wonderful thing, which is why there's just, you know, the client experience is fundamentally not different. And there's very little attrition in these kinds of transactions. Um, you know, it gives the succession advisor the ability to grow relationship well in advance of the date so that there it is seamless when it's all said and done. Attrition isn't a concern at all because these people have been onboarded the right way. Um, you know, risks though, in this situation, you know, this this advisor's never necessarily been a business owner. Uh, and they they have what are they going to be able to do now to continue to run the enterprise and run the business as both lead financial advisor and as a business owner? And where does that uh you know come back and contrast and and make maybe the business stall a little bit or not grow as much as they're kind of learning on the job a little bit? But again, if done properly and led well, uh, there's time to prepare readiness for that. Um, you know, certainly team dynamics shifts with new leadership, uh, but that could be a good thing and a bad thing. You know, it could be a bad thing in the sense that uh this junior advisor has a fundamental different view than the selling advisor did, unlikely. Um, but in most cases, that it shifts more about the team gets behind the new advisor. They want to see them be successful. They're bought in to the internal succession as well because they realize they're part of it. Uh their jobs aren't at risk because they're going to be you know supersized into a bigger organization, all that kind of stuff. Um, and and but candidly, for the seller, financial risks are probably a little bit higher. Uh, because it there's there's more to be paid out in the future, maybe less up front. Um, and and the uh the big backing of the big organization um that that sits behind it isn't there. And they really do need the advisor, this, the, the, you know, new advisor to be successful long term. Um, but uh but yeah, but again, great facts in both the you know, just sell kind of sell up, sell out uh merge and acquisition approach and the more gradual build from within succession apprentice approach.

SPEAKER_01 39:16

Yeah, you know, my my reaction to kind of as you were going through those um is that and and this isn't something you can document on a spreadsheet or or really, you know, um quantify necessarily, but I imagine this can be extremely fulfilling for a lot of advisors, right? You you get to spend time, you know, really preparing for the next chapter of your practice that that likely won't involve you in the in the same capacity that it has been for the last decade, two decades, three decades plus. But to be able to mentor someone, to be able to spend time nurturing the growth of that practice that's gonna you know outlive you, hopefully. Like I think I would get fulfillment out of that. I think that would be enjoyable for me. And yeah, I I think you're still gonna get the economics that you need to have a beautiful retirement, the life after that.

SPEAKER_02 40:02

Right.

SPEAKER_01 40:02

But you're gonna get that fulfillment as well. And while that might not apply to every advisor, I think it's gonna, I think it applies to a lot, or they would apply to a lot.

SPEAKER_02 40:09

So I I couldn't agree more. The um, you know, it's it's kind of like the the years of the life for the life in the years. Um, this this puts more life in the years, um, and and really gives a selling advisor additional purpose, uh, a different, additional opportunity to make impact just in a different way. It's a it's very insightful comment, Steve.

SPEAKER_01 40:31

And and I and your reaction there, I think, leads perfectly into this next point that I want to tee up for, uh, which are kind of nicely wrap up this this conversation in terms of comparing these two. It's it's about your why, right? So there you go.

SPEAKER_02 40:45

Now it's exactly right. And this is for all the uh advisors that we talk to and help with this this conundrum, that is it time question that we asked early on in the in the discussion. It's this what is your why? Why are you going through succession? Is money the most important thing or is legacy the most important thing? And in founders' world, our entire succession program is built on the idea of the continuity of care and the legacy of an advisor and carrying that forward. And again, I'm not I'm no judge and jury here. I'm not saying one's right or the other, one's wrong or the other. But the bottom line is for an advisor to be able to answer the simple question am I more economically focused in this transaction? And the the things we just spoke about, the idea of this years in life versus life in the years versus legacy, it's it's important to know early because it will dictate a path. Then I would say for the advisors that um are more focused on the maximum economic quotient and less concerned about the long-term legacy impact to all the things we've discussed today, uh, I think that in that world, you know, an MA path makes most sense. And but all the advisors I know, they've built it and cared for this thing for a long time. Legacy is super important to them. And so, you know, to to our point here then, right? What are all the considerations in both scenarios? Um, and you know, we've hit on a lot of them today. Um, but the the most important thing as as our listeners here and our viewers kind of read through this slide, it's it's what's right for you as an advisor, what's most important to you. And once you answer that question, it gets really easy and but still a lot of work to do. But it gets really easy then to begin to assess all of these points in a much more effectual way. Um, and if you and if if max value money is the most important thing, then the path to these things that you need to consider in a succession or sell scenario become much clearer. And and equally, if legacy is the most important thing and the gradual transition of relationship care is the most important thing, then again, how you think about these considerations are a little bit different. Um, and and and the key point I want to make about the the points here is these last two, right? Cultural and philosophical alignment and patience and flexibility. Uh this there is no easy button for succession at all. There is no flip a switch and it just happens. Whether you go an MA approach or whether you go an internal apprentice succession approach, it's a significant body of work. Um many advisors have transitioned firms over the years as we continue to see the mass exodus uh and and cross you know, leaving of advisors from big from broker dealers across the organization and industry. They know how hard transition is uh between broker dealers. This isn't that much different at the end of the day from uh from the what you need to expect in in work. There's work to be done to protect the value of this enterprise you've built and the relationships. But so patience and flexibility is critically important. But I would say the most important thing to consider is culturally and philosophically, are you the the the advisor who's selling aligned with the ultimate? And if the answer is no, then don't do it. Even if it means an easier path or a more uh economically viable path. Pick the one, the path that's gonna be culturally and philosophically most aligned with you so that you're staying true to yourself at the end of the day. Both scenarios are gonna provide great economic value. Both scenarios are gonna have their own unique uh strengths, weaknesses, opportunities, threats, all that kind of stuff. And so these last two points, be patient, flexible as you're going through it, and then really make sure that culturally and philosophically, where the destination is is aligned with your core values. Um it's really important to make this thing be successful.

SPEAKER_01 44:43

Yeah, Brett, I I think the fact that there's so many points in this graphic, right, just speaks to this the thing we've been talking about, that this does take time, right? You cannot check all these points in a short period of time. It's gonna take that gradual planning, whatever strategy you go with, it seems like, right? You you it's gonna take time, and this is just evidence of that fact. Absolutely. So, Brad, you know, if you're gonna take all of what we've talked about so far today, everything on the screen now, uh, and distill it down to a few key things that advisors they they just need to remember this. If they want to have success, building the proper strategy. What would you say to an advisor that you're sitting across from and talking about their approach to succession?

SPEAKER_02 45:31

Uh yeah, I mean, it's it's really simple. Start early. Um, build independence in the sense that you have your own original thinking through this process. And you're not just taking uh from someone you deem an expert what they say to do and how to do it, that you own the process, no differently. You've owned owning your own practice. Um develop leaders um internally so that regardless of the choice, um, an effectual outcome is is can be measured by by uh the clients that are gonna be served ultimately. Give yourself options. Um, but I'm not just talking financial options and options of different partners. I'm talking options that are gonna make you feel comfortable and sleep well at night, which is this last point, which we just hammered home on the last last slide. Stay true to your values. Uh, don't surrender the things that are most important to you for a 5% higher payout or valuation or uh you know, a maybe a slicker technology that seems cool at the time. You know, the bottom line is that the clients that you've served all of these years, they've served, you've served them because they believe in you. And the most important thing is who are they gonna believe in next? And and so it stays true to your value so that whoever that next is, whether it's the MA solution, the internal succession solution, um, that the clients, which is the whole point of all of this, uh, without them, there would be no value in this enterprise. And us understand those advisors are really important. So some homage a little bit to uh you know, to the purpose of our work and the economic outcome that's been created for us on being because of this of this great work in clients, stay true to your values, is the most important thing, is being successful uh through succession.

unknown 47:03

Yeah.

SPEAKER_01 47:04

Brad, that that makes a lot of sense. And you know, again, one thing that really sticks out to me in this is that need to start early. And that will help you create the options if you go to point four there, right? So um, whereas if you start you know too late, you you may find there's less options on the table. So it lets you choose the the best care for you, your practice, your team, your clients. Uh ultimately you're gonna have a better, better um experience through transition uh than you would otherwise. So yeah.

SPEAKER_02 47:32

It's kind of like what's the best way to avoid a heart attack, right? Exercise, start early to avoid it, or uh go go go go get the chest uh banged open because you you waited to it's too late.

SPEAKER_01 47:41

So exactly. Uh all right, Brad. So we're coming down the home stretch now of today's discussion. As the CEO of founders, as an architect of a lot of what has been built here for our own, you know, succession you know, program and strategy for the founders, you know, take us through what the founders solution kind of looks like, right? And take us through what it includes for advisors listening in who are curious, you know, uh, about what founders can do to help you across all the different areas we talked about. Brad, I want you to kind of take us through and and and uh help us help us learn about founders and what we are.

SPEAKER_02 48:17

Thank you. Yeah, sounds great. Yeah, so I think it it comes back to the even the slide before. What are the things to make it successful? And I do like to believe, and maybe I'm uh I'm I'm I'm lying to myself, but I don't think so. But I do like to believe that founders has kind of married the best of the MA approach with the apprenticeship approach. Um, and so what we focus on in our solution is starting early, which means preparing the advisor's legacy. Um that starts in founders through what are called our strategic enterprise program, where we become uh the true business partner to our advisors' practices, help them think about growing a purpose-rich servant-led enterprise. Um, we've got an incredible track record, Steve, of helping advisors organically grow their practices. Um, and so uh so they actually, because of SEP, have more value in the enterprise ultimately because they've grown a more substantial practice. And and so preparing legacy isn't just about the succession process, it's how to build a viable firm that's healthy and it's and it's living it up to its promises and it's delivering on the outcomes that it that it's committed to, you know, making the dream of the advisor come true, if that makes sense. So, so with us, succession planning doesn't even start when we're at succession planning, it starts in a partnership proposition with all advisors and member partners and founders through SEP and helping them prepare their legacy and even begin to think about what that might be. As we then get into the those early years of, okay, I'm I'm a I'm a few years out now, not a few months out now. It's all right, what do you want in succession? Do you want to work with us through founders apprenticeship program to find that young advisor who's gonna grow into the uh into the succession person over time? Um, or do you want founders to to plan on doing that with you? And what's that look like? And so we spend a lot of prep time thinking about this question and how are we gonna find that successor? Are we gonna hire it young and grow it, or are we gonna hire a little more experience and it needs to go more quickly, those kinds of things. Uh, we're then gonna move into evaluation of their practice. And and founders has a uh formula that we follow and use. It's um very market relevant. Uh, and so in that sense, we know that the member partner is getting getting fair value. But what's interesting about uh our our valuation model is we get to think about goodwill in a very unique way because we don't have attrition uh and we don't risk attrition because of the fact that they're already founders' clients through the member partner firm, if that makes sense. And so so goodwill is a really neat consideration in our world. Uh, and further, because of the ability to operationally move business with clicks of buttons and not having to repaper anything, um the the the a lot of times when you sell externally, a lot of clients, you know, interest stats are probably 12 to 18% don't actually come over, which means you have attrition hitting a year or two years later. And all of a sudden that the business worth 2 million is now worth 1.8, 1.7, and things are being adjusted appropriately. So back to you know, the value of the practice, we help protect the value of the practice because uh doing it as a founder's member partner uh has has makes it so efficient and effective operationally. Um, and then and then we also work with advisors for continuity planning. You know, what are those sudden events that you know where we all have to react that we don't like? You know, something happens to an advisor health-wise or or those kinds of things. And so uh how do we consider that in the context of their practice? And so it's this, you know, founder solution, as you know, uh isn't just a partnership at succession, it's the lifetime partnership of helping advisor grow and run. This again, I've said it many times, purpose-rich certain-led enterprise uh and the succession is just the natural extension of when we're ready to say, you know, uh I'm ready. I'm I'm ready to have a different set of of uh you know how I use my time and responsibilities on any on any given day.

SPEAKER_01 52:01

Yeah, I I I love our apprenticeship program. I love everything we do, obviously. Um just like I'm obviously biased in that, but I love our apprenticeship program. And if anyone listening in wants to learn more about the apprenticeship program and even maybe even uh speak to some of our our apprentice uh graduates, if we want to call them that, um, let us know because I think we can uh um have some great conversations if you're interested.

SPEAKER_02 52:21

So and so this this marriage of MA and apprentices we wrap up, we bring a lot of the the things that are the strengths of the MA approach, ease, fair, you know, excellent economic value, all that sort of thing. Um but we also, if done early, uh we get to help them go grow and build um their legacy partner that carries on the traditions of the things that have been most important to that advisor. Yep.

SPEAKER_01 52:42

All right, Brad, bring us home. I I want you to to think about everything we talked about today, and in one clear, concise uh statement, you know, what is the one big takeaway that you want everyone listening in to walk away from discussion with today?

SPEAKER_02 52:59

Yeah, so um I'll I'll get to the quote in just a second, but I'm gonna say that the that the answer to that question is congratulations. Uh, congratulations to advisors that have poured their heart and soul, Steve, into building a practice of significance, into growing an enterprise that serves and cares for their communities, uh, their clients, their families, their businesses, so that people can go to sleep at night, uh, knowing that their own financial futures are taken care of. So, congratulations that you've built a business of significance uh and therefore an asset that you can actually translate into a further economic outcome for yourself, your family, your goals and dreams. Um, and so that's that's the that's really the most important thing. But it but in this context of the conversation today, it really comes down to this. And that is that no discipline seems pleasant at the time, but painful. And that later on, however, it produces a harvest of righteousness and peace for those who've been trained by it. And what I mean by that, that by that quote is the work you put into to make succession successful, it's not always easy. You know, it's it's roll the sleeves up, it's it's kind of get or done. It it distracts from what you've been doing every single day for decades, probably. But the outcome of that is is a harvest of righteousness and peace. Um, and and and by that I mean for everybody involved. You, the clients that are served, your team and stakeholders have been part of this journey with you, um, because it's done right. And so that's the key point. Do it right. Don't do it rushed, don't do it haphazard, do it right so that you're the the very standard by which you've set professionally in care and service isn't unhinged and isn't undone in the snap of a finger because this has been considered the right way.

SPEAKER_01 54:43

Yeah, great point, great close. Um, Brad, I just want to thank you again for for joining us for this conversation today. Um, always love talking to you about this. You're a great guest and a thoughtful voice on subjects like this that have, you know, real impact on advisors and their practices. So thank you for joining us. I hope everyone got a lot out of the discussion today and uh and your thoughts, wisdom, and insights.

SPEAKER_02 55:06

Yeah. Thank you everybody for the time and appreciate it. So um, I'll let you wrap it up, Steve. Yeah.

SPEAKER_01 55:11

So for everyone listening in, if you have questions about founders, our succession program, please visit uh foundersfinancial.com. Or you can also feel free to just connect with us. You can email us at events at foundersfinancial.com. Uh we have a lot of free resources and team members that are going to be available to help you plan for succession, help you learn a little more about what Brad was speaking about earlier, uh, and learn about the different programs that ultimately make the most sense for you. In the meantime, thank you all again for coming. Uh have a great rest of your week, and we look forward to seeing and talking to each of you again soon. Thank you.

SPEAKER_02 55:44

Thanks, Steve. Everybody have a great day.

SPEAKER_00 55:47

Thanks for spending time with us on the Built By and For podcast. If this conversation resonated, follow the show on Apple Podcasts, Spotify, or YouTube, and share it with an advisor in your circle who's thinking about what comes next. To learn more about Founders Financial and our solutions for independent advisors, visit Foundersfinancial.com. The Built Buy and For Podcast is produced by Founders Financial. The opinions expressed by hosts and guests are their own and do not necessarily reflect the views of Founders Financial. Content is for informational purposes only and is not intended as investment, legal, or tax advice. Securities offered through Founders Financial Securities, LLC, members FinRum, and SIPC, registered investment advisor. Copyright Founders Financial, all rights reserved.