For the past few years, experts have been predicting a mass exodus of retiring advisors from the industry. Many of these same experts believed that the pandemic would finally make this mass sell-off finally happen. We speak with advisors daily and we are seeing a different trend entirely.

Instead of cashing out, many advisors are looking to “take chips off the table.” They want to take advantage of unprecedentedly high valuations and realize some of that equity now while still staying in the game. Many of them have years, if not decades, of working years left ahead of them. They want to scale back so they can either focus on a core group of clients or shift their energy to more strategic, value building activities that can help position the practice for future generations. Or they want to enjoy life more but aren’t quite ready to hit the “retirement” button.

Here’s what this trend means for advisors.

For advisors looking to acquire practices

Advisors looking to acquire will have to consider deals that aren’t straight acquisitions. Some of those deals still exist, but a growing number of practices are falling in this “taking chips off the table” category. The pandemic has many senior advisors looking at their quality of life while also looking at practice or career goals they have yet to achieve. Take time to understand the senior advisor’s goals and be open-minded about creating a succession strategy that lets them transition out of ownership, meet their personal and professional goals, and phase you in as a successor.

For advisors looking to do a partial sale or phased succession

When looking to sell only part of your practice, think about creating an opportunity that creates value for your successor now and over time. Be open minded about where your successor comes from, especially if you don’t have a qualified junior advisor who can take the reins. Be diligent in the vetting process. Think beyond just the economics and look at overall fit. Does your practice align with their investment philosophy and culture? Can they help you achieve your goals and provide you with a clear path toward your eventual retirement, while still allowing you to provide value in the near future?

For both buyers and sellers, it’s a good idea to leverage an experienced third-party to help you structure the deal. Too often advisors find themselves in deals that either won’t work for financing or which leave one or both parties at risk. Most M&A consultants offer free initial consultations and can help you evaluate your options. Do your homework before committing to a deal.

If you are looking to buy or sell a practice, contact us to learn more about your options.

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