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Succession Exit Planning Deal Structures

All registered financial service professionals should have a succession plan in place in order to protect their books of business in the case of unforeseen events or to plan for retirement. Our team at Lax & Neville LLP has advised numerous registered representatives on proper succession strategies in order for them to determine the best way to maintain client relationships while monetizing the book of business that they have spent their careers building.

Succession planning is an essential step for a financial advisor to conclude a successful career, often spanning decades and filled with valuable professional relationships built on trust and hard work. However, our experience is that too few registered representatives have a succession plan in place or implement a succession plan with the same dedication and attention to detail that they exercised when building and maintaining their book of business. Failing to do so may carry serious adverse consequences when an unfortunate and unexpected event occurs. In situations such as an early death or disability, selling a business is much more difficult, or sometimes it is simply too late. In recent years, many independent broker dealers have developed internal sales programs, some of which might be appropriate for some registered representatives. In fact, even wirehouses have developed internal retirement programs. These programs have been described as seeking to protect the wirehouse more than maximizing the representative’s proceeds. In worst case scenarios, firms may reassign a representative’s accounts to other financial advisors, with no financial benefit to the broker or broker’s estate who built that business.

Generally, financial advisors have several options for their succession plans, including: (1) sell their book of business; (2) groom team members to take over; (3) merge with a complementary practice with a payout schedule; or (4) participate in their brokerage firm’s succession/retirement program, if their firm offers one. Each of these options requires legally binding agreements. Because no one is able to predict the future, choosing the proper succession plan is crucial to a financial advisor’s continued financial success.

If you are a financial advisor looking to protect your book of business, sell it, or create a retirement agreement, our firm offers intelligent, strategic advice regarding implementing succession plans. Please contact our attorneys for a free consultation.

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