SEI Survey: Majority of Advisors Live for Today, Lack Plans for Tomorrow

SEI Identifies 6 Guidelines to Help Firms Build Lasting Value

OAKS, PA -- (Marketwire) -- 03/12/13 -- While prevailing 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. That's a mistake. According to various research reports, investors under age 50 are increasingly trusting and willing to pay for financial advice. But advisors can't use the same old techniques to win their confidence. 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. It means focusing on practice management as much as managing investments, and it means continually keeping an eye on the long-term goal of building enterprise value.

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. That knowledge gap is an opportunity for advisors. Create an education program to help the next generation understand and address the issues they'll face as they inherit more wealth and manage larger estates. Additionally, complement the investor-education program with a topical training program for advisors, which will help the firm create relationships early and leverage them for the long-term.

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.

To access SEI's Succession Planning the Next Gen Way Toolkit, including a paper on developing an action plan for strengthening a firm, a transitioning checklist to help determine a firm's value, and access to a succession planning webinar, please visit here.

About The SEI Advisor Network
The SEI Advisor Network provides financial advisors with turnkey wealth management services through outsourced investment strategies, administration and technology platforms, and practice management programs. It is through these services that SEI helps advisors save time, grow revenues, and differentiate themselves in the market. With a history of financial strength, stability, and transparency, the SEI Advisor Network has been serving the independent financial advisor market for more than 20 years, has over 5,400 advisors who work with SEI, and $33.7 billion in advisors' assets under management (as of Dec. 31, 2012). The SEI Advisor Network is a strategic business unit of SEI. For more information, visit www.seic.com/advisors.

About SEI
SEI (NASDAQ: SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. As of December 31, 2012, through its subsidiaries and partnerships in which the company has a significant interest, SEI manages or administers $458 billion in mutual fund and pooled or separately managed assets, including $201 billion in assets under management and $257 billion in client assets under administration. For more information, visit www.seic.com.

Source: SEI

Released March 12, 2013