Legacy isn’t built in the twilight of your career. It’s created over time, through an intentional long-term approach.
Unfortunately, by the time many advisors give serious thought to succession or legacy, they’re often beyond the window where strategic decisions can help maximize their legacy and add meaningful value to their company.
With forethought and early planning, though, there are ways to build transferable value and position yourself for a successful transition. These four factors can influence the perceived value of your company and its ability to sustain success beyond your exit.
1. Strong Client Relationships
A solid client base with a strong AUM is perhaps the single most important factor in determining a firm’s value. Growing your client list and AUM requires the freedom to focus on building new relationships and expanding existing ones, not on compliance, IT, or administrative tasks.
But AUM isn’t the only consideration. Client retention and the likelihood they’ll remain through the transition also help determine value. The ability to focus on your clients isn’t just an opportunity to build portfolios; it’s also a chance to continue building personal relationships and deeper trust. When you’re ready to exit, your ability to have honest conversations with clients, assuage any concerns, and instill confidence in the transition will be valuable.
2. Integrated Operations
Founder-dependent companies often take a hit in valuation. When a buyer or successor evaluates a firm, they assess whether it can function without the person selling it. If the answer is no, the risk can potentially increase and the price can go down.
Many independent advisors operate in a go-it-alone model, not realizing that it’s often a form of founder-dependence. Operational infrastructure, such as documented workflows, defined roles, and scalable back-office support, helps define a business. Doing all of that on your own inhibits your ability to grow relationships, and it also means that any value related to operational infrastructure leaves with you.
For independent advisors, building that infrastructure means making deliberate choices about what to retain ownership of and what to hand off. The right mix allows you to build more value into your firm while also delivering greater value to clients.
3. A Brand You Own
Brand is one of the most undervalued and misunderstood components of a valuation. Many advisors spend years building a reputation among clients, with their peers, and within their community. There is incredible value in that brand building, which can help make it easier to add clients and potentially grow your firm.
Ownership is the part most advisors don’t think about until it’s too late. In models where advisors operate under a corporate umbrella, the umbrella company often owns the brand and may also control the clients. Advisors who build under someone else’s name are building someone else’s asset.
Independent advisors who own their brand and have the autonomy to build it under their name, around their values and client experience, are more likely to create transferable value.
4. A Succession Plan
The advisors who achieve the best succession outcomes don’t wait until they’re ready to exit. They begin planning well in advance.
Early planning gives you a runway for identifying gaps and areas of risk, and creating a holistic strategy to help optimize the future value of your company. Planning early provides time to develop internal talent, execute a phased client transition, and upgrade and integrate operations.
Firms with a clear, documented succession plan are typically worth more than businesses that lack them.
Importantly, early succession planning also offers owners options. It does not lock you into a single outcome, such as selling the company. Instead, it provides you with the structure and strategy to execute a range of transitions, allowing you to choose the best path as you approach an exit.
Where You Build Matters
A legacy plan isn’t a one-time event. It shows up every day, in the decisions you make and the way you run your business. The four factors explored here represent some of the decisions that will ultimately influence the value of your firm. Your ability to address them is determined, in part, by the type of model you operate in and the partner you work with. It affects how much operational support you receive, how much time you can invest in client relationships, and how much brand ownership and control you have.
Kovack Financial Network enables independent advisors to build and benefit from their legacy by providing critical operational infrastructure while allowing them to maintain ownership and control of their brand. If you’re thinking about what the next chapter of your career looks like, we’d like to be part of that conversation.
Kovack Financial Network is a registered DBA name of Kovack Financial, LLC. Securities offered through Kovack Securities, Inc. Member FINRA/SIPC. 6451 North Federal Highway, Suite 1201, Fort Lauderdale, FL 33308, (954) 782-4771. Investment advisory services offered through Kovack Advisors, Inc. Kovack Securities and Kovack Advisors are subsidiaries of Kovack Financial, LLC.