NEXT CHAPTER

Steve Gresham

Savvy acquirers are learning to value the long-term profitability of client relationships .

N OLD SAW CLAIMS THAT GOOD WINE AND WISDOM GET better with age . But of late , that doesn ’ t seem to apply to aging advisory businesses . At our think tank , Next Chapter , we see organizations of all sizes delivering great financial results , in the form of earnings , but losing assets as their clientele inevitably ages and leaves .

A decade from now , we may recall the sale prices witnessed during the zero interest-rate era of the pandemic as a high-water mark . Advisors can ’ t control the macro environment , but if left unchecked , firm valuations could continue to slide . That ’ s not the next chapter most ownership envisions .

There are , broadly speaking , three lenses through which different groups of advisors view their situations .

The first group , let ’ s call them Group One , is inclined to say : “ What ’ s the problem ?” If their firm ’ s earnings are great — powered by a historic bull market — then owners will likely see only minor problems . If they plan to retire soon and sell their equity , they ’ ve got nothing but a severe bear market to worry about .

They are likely timing their own retirements to coincide with this cresting wave of success . Things are great for employees and stockholders too , as long as their time horizons at the firm are short . Call them smart or lucky , but they should be fine , as long as they follow through on their exit plan and don ’ t stay too long .

The second group looks at it by fretting over the client attrition . Group Two firms are operating as usual for the most part , but they ’ ve lost longtime clients

Advisors can ’ t control the macro environment , but if left unchecked , firm valuations could continue to slide . who ’ ve either died or reached some other critical major event in their lives like facing down the death of a loved one or a significant illness .

As you know from extensive industry data , advisors who don ’ t have solid relationships with their clients ’ spouses , partners or adult children seldom hang on to those relationships ( different sources put the percentage of new widows who fire their spouse ’ s advisors at 70 % to 90 %, while advisors are said to lose 90 % of their late clients ’ children .) One of our trust and estate colleagues at Next Chapter says that when she ’ s competing for new business , she ’ s seen survivors in a family quietly questioning the value of continuing with their incumbent advisors , and she usually finds enough overlooked details to win clients away . There ’ s a cost for their inaction . Advisors in this situation don ’ t lack the interest or willingness to hold on to the business . They mostly aren ’ t sure how to proceed when the clients ’ surviving family members are staring down critical life moments like death or college funding or illness and need guidance .

The third group of advisors look at things this way : If this is the problem , bring it on .

Group Three firms lean into the challenges of handling aging clients and perceive the opportunities and problems of dealing with surviving spouses or partners and children . Advisors who see around

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