1.5 years in as an FA (second career)—> stay put or pursue a $200M succession opportunity?
I’m about 1.5 years into an FA program at a large independent BD. I’ve built around $10M AUM, with probably ~$6M portable if I left.
I’ve been approached by an older advisor who is also a close family friend at a much smaller independent firm with roughly $200M AUM, ~95% fee-based, and about $1.5M in production.
His current payout is roughly 92% before overhead, trading costs, staff, etc. (but it sounds like these expenses are a couple hundred thousand) The firm also manages its own investment models internally, so it’s a much more hands-on investment operation than where I am now.
He already has a younger advisor who has been with him about five years. That advisor really enjoys the portfolio management/investment side but isn’t naturally someone who wants to be out networking and bringing in new business. The senior advisor’s thought is that the two of us would eventually complement each other where he would focus more on portfolio management, while I would focus more on financial planning, client relationships, and business development/rainmaking.
The rough succession plan he’s discussed is that I’d join, work alongside him for about a year, then he’d start taking roughly $750–800k/year for around five years as he transitions out. Eventually the practice would fully transition to the younger advisor and me. I still need a lot more detail around the actual ownership and economics. And I obviously would have terms written out and set before making the jump.
My current situation is good too. I’m at a much larger BD with a ton of planning, investment, lending, and specialist resources. There are also several older advisors in my office, and I’ve already had some clients/accounts handed to me on 50/50 splits because they’re at capacity.
The downside is I’m currently only making roughly 40 bps on AUM, so the long-term economics of building here are very different.
For those who have been through succession deals, what would you want to know before seriously considering something like this? What would you diligence around the buyout, ownership split, client retention, partnership structure, and economics?
Edit: I will not do anything without getting it in writing first