Navigating Uncertainty: Key Considerations For Wealth Manager Exit Planning

A well-crafted RIA buy-sell agreement is essential for ensuring business continuity and providing a clear, legally sound exit plan. It protects a firm's legacy and its partners by defining what happens to an owner's stake upon a specific event.

Key Considerations for an RIA Buy-Sell Agreement

A successful agreement requires careful planning and legal expertise. Here are the key components to consider:

• Triggering Events: Clearly define the events that initiate the buy-sell process. Common triggers include retirement, disability, death, or voluntary departure.
• Valuation Methodology: Establish a transparent and fair method for determining the firm's value. This can include using earnings multiples or a third-party valuation to ensure an objective price.
• Funding Mechanisms: Outline how the buyout will be financed. Options include using existing firm capital, life insurance policies, or external financing.
• Internal Succession: If an internal transition is the goal, specify the criteria for a successor and the plans for training and development to ensure client confidence.
• Non-Competition Clauses: Include non-competition clauses to protect the firm's client base, while also ensuring the agreement is fair and legally sound.
• Dispute Resolution: Pre-determine a mechanism like mediation or arbitration to resolve any disagreements without resorting to costly litigation.
• Regular Review: A buy-sell agreement isn't a one-time document. It should be reviewed and updated regularly to reflect changes in the business and personal circumstances of the owners.

How AdvisorLaw Helps with RIA Buy-Sell Agreements

Navigating these complexities requires specialized expertise. AdvisorLaw offers a comprehensive suite of services to ensure a smooth transition and a deal that aligns with your specific goals.

• Complimentary Business Valuations: We provide a free, objective assessment of your firm's value, including a SWOT analysis and industry comparisons. Our valuation tool, developed in partnership with Clifton Larson Allen (CLA), uses over 35 data points to provide a reliable estimate.
• Successor & Partner Sourcing: Through our Practice Purchase Network (PPN), we connect you with potential buyers, creating a competitive environment to find the right partner for your firm's legacy.
• Expertly Managed Transactions: Our experienced attorneys manage the entire transaction process, providing guidance on tax considerations, and drafting and negotiating airtight agreements.

With over 50% of financial advisors nearing retirement, the RIA market is in a significant period of transformation.