Monthly Archives: March 2013


OAKS, Pa., March 12, 2013 – While prevailing financial industry research shows that the overwhelming majority of financial advisors are 50 years or older, most advisors don’t have effective plans for the future of their businesses, according to an SEI (NASDAQ:SEIC) survey released today. More than two-thirds of advisors polled (68 percent) say they have no formal succession plan for their businesses and despite aging client bases, more than half of those polled (54 percent) have no strategies in place to attract younger investors. The survey, of more than 100 financial advisors, points to a need for advisors to understand the importance of creating a strategic succession plan with a focus on building long-term business value and sustainability.
“Simply preparing a succession plan is no guarantee of successfully transitioning the firm to new owners, but it is an important step,” said John Anderson, Head of Practice Management for the SEI Advisor Network. “Rather than preparing a plan to sell your firm, you need to prepare your firm for sale. That starts with taking an in-depth look at your book of business and processes. It’s important to have a plan in place to develop the next generation of leaders at your firm and to take a strategic approach to securing the next generation of clients your firm will serve. This more comprehensive view of succession planning ultimately increases your firm’s value.”
The survey results also revealed that even advisors with formal succession plans may lack specifics in those plans. More than a third of advisors (39 percent) with a succession plan admit they’re not sure to whom they’ll ultimately transition their businesses. Meanwhile, nearly half of those polled (47 percent) with formal succession plans said they plan to transition their businesses to “an identified internal buyer,” while only 14 percent plan to transition to “an outside buyer.”
“One of the things that became apparent as I built my succession plan was how important the long-term viability of my firm was to me because of the time I spent building my practice to where it is today,” said Tom Liccardello from Compass Capital in North Andover, MA. “I think it’s easy for advisors to get caught-up in what happens day-to-day and not consider the future. I took a step back to look at the big picture and to make sure that the firm would survive without me. I’m now putting a plan in place that will transition the firm to my daughter when I’m finally ready to retire.”
To assist financial advisors in preparing their firms to be sold, SEI identified six key ways advisors can enhance the value of their firms. The six-step action plan includes:
1.     Understand Younger Investors – A surprising amount of America’s wealth is held by investors under the age of 50, but many advisors ignore this growing segment.Advisors must understand the habits and mindsets of younger investors and cater to their individual preferences in order to attract the next generation of clients and ultimately, build more sustainable businesses.
2.       Build Enterprise Value – In today’s environment, many firms aren’t worth what their owners think they’re worth. But to truly build value demands a change in mindset. It requires building trust and relationships between clients and the firm as a whole, not just clients and individual advisors.
3.       Recruit, Train, and Retain Younger Advisors – Growing a firm depends on attracting the next generation of clients and that, in turn, depends on recruiting the next generation of advisors. That’s easier said than done, especially when only three percent of advisors are under the age of 30. To compete for the best young talent, a firm needs to provide training, technology, and a great environment; a firm must articulate a plan for growth and position itself as a destination for up-and-coming professionals – and clients.
4.     Create a Next-Gen Education Program – Industry surveys show that younger investors are hungry for information and many times they’re relying on employers, friends, or the internet to get it.
5.       Rethink Standard Operating Procedures – Growing a business requires taking a hard look at all aspects of the business, including processes, client service, technology, and transparency. Then, be ready to make the changes necessary to ensure the firm’s operational procedures can support your vision for long-term growth. The ultimate goal of this process is to create a business that would make it possible for a potential buyer to take over with limited interruption.
6.       Manage Wealth, Not Assets – It might be a slight distinction, but research shows that advisors who consider themselves wealth managers earn more money, have deeper relationships, and build stronger practices than those who call themselves financial advisors. Advisors shouldn’t limit their businesses to investment management. A wider range of expertise will create more opportunities to strengthen relationships with clients, drive more revenue, and ultimately build the firm’s value.
The ten advisors at Compass Capital are part of the depth of bench that our clients enjoy as no one advisor at Compass is a “rock star” whose shoes cannot be filled in the event a succession plan is triggered. Our collaborative practice and our attention to the six steps outlined above by SEI helps to remove the risk (of succession failure) to our clients. We congratulte Tom and his daughter Cristine on both having the talk and “walking the walk”for succession planning.



“Sequestration”—Is the Sky About to Fall?

the following commentary is prepared by SEI Investments Management Corporation and can be viewed in its entire original form at\sequestration_feb_2013.pdf


“Sequestration”—Is the Sky About to Fall?


        • Some $85 billion worth of federal spending cuts are expected to take effect on March 1.
        • While this looks like a large number, it amounts to only 2.4% of the federal budget and 0.5% of the U.S. economy.
        •  SEI sees no reason to adjust our investment strategies based on the potential impact of sequestration


SEI’s View


Sequestration is just the latest in a series of government-created challenges the U.S. economy and financial markets have been forced to endure in recent years. So far, markets appear to be shrugging off the Friday deadline, suggesting there may be little if any negative effect. It is also not inconceivable that markets might surprise to the upside in response to sequestration; despite that fact that it’s not the best or most effective method to reduce the deficit, it still represents a reduction in government spending. As much as markets enjoy loose fiscal and monetary policy, they are equally aware of the eventual effects of unsustainable deficit spending. In light of the current scenario, SEI sees no reason to change its investment strategies. In any event, there will be other fish to fry in the coming months, including the need for (1) passage of a continuing spending resolution at the end of March to avoid a government shutdown and (2) addressing the debt ceiling on May 18.
If you have any further questions about this topic your trusted financial advisor is always willing to have that conversation with you.