Category Archives: Succession Planning

Around the RIA Web with Adhesion, June 2016

A few great reads from the month of June, highlighting some of the key conversations we’re having with advisors. Growth, technology, investment design, outsourcing, recruiting, compliance…all are key discussion points for RIA firms and we share the following for your own discussions:

Wealth Management writes that the SEC proposal on succession planning is officially out, requiring RIAs to explicitly adopt and implement business continuity and transition plans. For those who have yet to adopt formal policies, the cost of implementation may be substantial and accelerate the trend towards multi-advisor platforms.

The clear trend in ETFs is towards lower fees, but massive amounts of money still reside in higher-fee counterparts. As shown by, the march will continue at its own pace with RIAs and ETF strategists the typical early adopters of lower-fee products.

EVERYONE is in the market to buy existing advisory firms. Michael Kitces shares some ideas on (too?) popular ways to find opportunities, as well some less-traveled paths and key considerations in an acquisition.

Common theme for successful outsourcing…find a strategic partner not just a product vendor. How two advisors leverage healthy relationships, via Financial Planning magazine.

The standard 60/40 portfolio has been a tough benchmark in recent years, but basic math says that will be a tough act to follow. Illustrations from EconomPic and Charles Sizemore reveal a need to blend in some alternatives going forward.

Happy clients generally means happy advisors. Julie Littlechild suggests some steps for a manageable 7 week bootcamp to deeper client engagement.

Servicing clients of all sizes is a constant battle between the hearts and minds of advisors. There is no doubt that the DOL rule will force firms to reconsider how and whether they service smaller accounts. Our clients have been on this issue long before the DOL ruling, prompting ETF Select to be included as a new investment option for Adhesion client firms.

Retail investors are often mocked as “dumb money”, but behavioral biases are just as likely to impact those human beings known as advisors. Abnormal Returns shares thoughts on how hindsight bias can creep into all of us, and how the habit of writing can be an outlet for clear planning. Michael Batnick does his part to write about hindsight bias as well, and how some market truths are merely traps.

Reverse churning is a serious issue, and Blaine Aikin thinks the new DOL fiduciary rule puts more bite into the ability for regulators to demand more documentation from firms transitioning IRAs.

As Ben Carlson shares, what a firm DOES NOT do can reveal just as much as what they do. This negative knowledge can act as a worthy qualitative filter in assessing investment managers. Pair that with this riff from Tom Brakke on man vs. machines and you’re ahead of most highly-paid investment committees.

In this world of more sophisticated number crunching, let’s not forget that market “risk” is not truly quantifiable. It is not those with the best formulas who deliver the best plans, but Phil Edwards of Mercer suggests an open and imaginative mind towards the uncertainty of the future.

Client acquisition is a real but hard-to-quantify cost for advisors. Michael Kitces had two comprehensive articles on low-cost and high-cost ways to grow one’s client base.

The active vs. passive debate is never-ending but thoughtful advisors can look with an objective lens at the merits of both sides. As Nir Kaissar shows, the S&P 500 as it currently stands is currently structured as a bet on high valuation-stocks.

There is constant competition for the attention of affluent investors. Are there aspects of your practice that are highly unique to your firm? Matt Oechsli shares 13 true differentiators for financial advisors.

No such thing as a perfect portfolio but a core/satellite approach can provide an ideal mix of cost, reward/risk, and client behavior. Deborah Fox shares some thoughts on logical blends.

Interesting insights from the Schwab Independent Advisor Outlook Study into the way different RIA firms see their business changing over the next few years.

Adhesion continues to work behind the scenes in helping advisors grow, with new options allowing the integration of Outsourced CIO implementation via Mercer and robo technology via Riskalyze. We welcome your feedback at, and encourage you to subscribe on the upper right of this page to receive our regular blog updates.

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RIA Succession Planning

“We are an industry of planners who have planned for everyone but ourselves and our own businesses” Ryan Zeeb

Succession-Simplified is a recently published piece that caught our eye. Written by the CEO of Camelot Portfolios, a strategist available via the Adhesion UMA platform, it provokes a number of thoughts that are relevant to advisors at any career phase.

The sad story that sparked this paper is a reminder of how much lies outside of our control, and how important it is to move in the direction of a more sustainable enterprise that can extend beyond its present identity. This movement benefits a) the clients and their heirs, b) the owners and their heirs, and c) the firm’s existing support team, by adding a level of stability in a world of uncertainty.

As a specialist serving the outsourcing needs of RIAs, we see often just how much of a firm’s identity can be tied directly to the “brand” of the founder.  In working with Adhesion to institutionalize firm operations, a critical step that is often included is a rebranding of the firm that can sustain after the founder decides to step away.  Together, these steps can help position the firm for smoother transition and greater enterprise value.

A few starting points to provoke action include the following:

  1. Start with simple – answer the essential questions before worrying about every detail
  2. Challenge your ego and identity- create repeatable processes to extend the firm’s reach beyond today
  3. Quit talking and start doing – think of the succession planning process as a video, not a snapshot

And of course, control. When to put a plan in place, how early to start the transition, who the successor(s) will be…these are among the rare outcomes that actually lie within the advisor’s control. To continue considering key ways to tackle the succession issue, enjoy the full discussion here…


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Does RIA Succession Planning Conflict With Fiduciary Duty?

With the average age of RIAs nearly 60 years old, a generation of advisors are nearing retirement and considering options for succession planning.  Many RIAs have been well-served by holding themselves to a fiduciary standard and regulation under the SEC.  The fiduciary duty entails that RIAs act in ways that are solely in the best interests of their clients.  This includes the “duty of care”, which is the responsibility RIAs have to not mislead clients and have a reasonable basis for any investments made on their behalf.  There is also a “duty of loyalty” that prohibits any conflicts of interest and requires the advisor to place clients’ interests above their own.  A recent article in Financial Planning discusses the issue of fiduciary duty in the context of RIA succession planning.

As the article points out, successful RIA firms with good cash flows make attractive investments for a variety of potential buyers.  As RIAs continue to gain value, more buyers with more capital are circling attractive prospects.  This is obviously great news for advisors.  However, how should the soon-to-be-retiring owner of a lucrative firm incorporate fiduciary duty into his or her succession plans?  No one can be blamed for wanting to get the most profit out of their business or seeking financial security for their family.  But if an RIA chooses to maximize profits over clients’ long-term interest, does this violate the fiduciary duty?

Another important issue raised in the article is the problem of having a successor in place.  Many founding advisors would prefer an internal succession of some kind, but what if there isn’t one in place or the heir apparent isn’t quite prepared?  Does transitioning to a successor who isn’t fully prepared to advise clients or manage the firm violate the fiduciary duty?  These are questions that can only truly be answered by the advisors themselves, but as the founding generation of RIAs nears retirement they are certainly worth asking.

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