The Importance Of Continuity Planning

by | Aug 31, 2023 | Appearances, Webinar

Aptus is joined by Scott Leak,CFP® Senior Consultant and Director of Business Development at FP Transitions.

During this session we discuss the importance of continuity planning, updates on the M&A landscape, valuation methodologies and drivers of equity value. This is a can’t miss discussion with an industry leader in the M&A space.

Panelists include: Scott Leak, CFP®, Derek Hernquist, & James Yahoudy, CFP®

Website referenced during session:




The opinions expressed during this call are those of Aptus capital advisors and are subject to change without notice, this material is not financial advice for an offer. Selling a product forward-looking statements are not guaranteed. Aptus reserves the rights, modify its opinions and techniques based on specific inputs or client needs. More information about Aptus investment advisory services can be found in its form adv, part two, which is available upon request, starting to get a little bit better at reading that disclosure. it’s a mouthful, I feel. I feel like I just heard a, one of those TV commercials for, some new prescription drug.  

Exactly. Well, given maybe some of the folks here are familiar with Aptis and, and some are, are maybe not so familiar with us, we are of course, more of an investment focused firm, and we, we are definitely interested in, in bringing more practice management topics to the table.  

We thought this was a perfect time and opportunity, given, you know, what, what we’ve seen year to date. We have some interesting news just this week with United Capital, or I guess Goldman unloading United Capital to creative planning. And, and just the m and a space has, has transformed so much over the past 10, 20 years now. so, thankful to have Scott Leak with FP transitions here.  

And, essentially, we wanna make this more of an open forum as opposed to a presentation where we give an hour long, market update on the m and a space. So we, we’ve collected, Derek and I have collected questions from colleagues, questions from clients, and, we’re, we’re gonna make sure we leave time at the end for, for questions from, from you attendees.  

just to be sure this is time well spent and any more formal updates, white papers, data on, valuation trends, whatever it may be, that that could be a takeaway one-to-one conversation with either our team or Scott’s team. Of course. So, I’ll kick it off with a, a quick introduction to, to Scott. He is, industry veteran over 20 years.  

You almost said 40, oh my gosh. I thought that going Over 20 years in variety, the leadership roles at TD Ameritrade Institutional. And, kind of interesting this week being the, the last week of TD Ameritrade, institutional rest in peace. I actually also came from td, full disclosure, Scott. Scott did hire me on his team a number of years ago, and I, I’m looking to repay him by, wasting some of his time on a webinar today.  

So maybe I’ll figure out a better way to repay him. but Scott is now a, senior consultant and director of business development at FP Transitions. He, he really just brings a, a, a diverse background with working with advisors of all sizes, whether they’re looking to phase out of the business or in mass acquisition mode, whether you’re a state registered firm or multi-billion dollar firm.  

He just brings it a lot to the table. So, looking forward to the conversation today. Scott, maybe we could kick it off. Just, maybe you can just introduce fp transitions to the group and, and we can go from there. Yeah. Thanks. James and Derek, appreciate you guys having me. for those of you who are not familiar with FP Transitions, or maybe you’re loosely familiar with fp, we, we probably do a lot more than, than you realize.  

so you can certainly learn [email protected]. That’s fp as in financial planning basically we provide advice, consulting expertise to independent advisors who are looking to identify, build, and or realize, the equity value in their business. So that, that pretty much in a nutshell covers all of the services that we, we provide.  

We’ve been around since 1999, so over 20, almost 25 years in business. We’re now over 60 professionals, and most of them are highly compensated individuals. valuations team is staffed with certified valuation analysts and certified business appraisers. Analytics team is staffed with CFAs. We’ve got CFPs, MBAs and former advisors and business owners on staff. we’re now up to 10 attorneys on staff. So we really have everything we need in-house to do full end-to-end consulting for advisors on continuity planning, succession planning, m and a transactions.  

we do over a thousand valuations a year, have done over 15,000. Our history. We’re doing over a hundred m and a transactions a year, whether it’s advisors coming to us, asking for us to help them sell their business, or advisors who know each other and know they want to do a transaction, but still need our expertise to come to deal terms and, you know, legally document the transaction. So, you know, we do those services.  

We’ve got ongoing services for advisors that wanna do valuations, benchmarking, get coaching and consulting to those benchmarks. How do we improve the value of our business, either for eventually planning to sell it and maximizing that value, or if we’re on the buy side, how do we help firms make sure they’ve got the right capacity, scale and, and, everything they need to be successful buyers as well. So, that’s, that’s an hour long presentation that, that I can cover in about four minutes. So that’s, that’s a little bit about fp but, I’m more excited to, do this kind of fireside chat than, than just rattle off a presentation.  

So James and Derek, I’ll turn it back to you to start peppering me with questions. Yeah, sounds good. And we wanna be sure to focus today’s conversation around continuity, just because its important and feel like there’s a lot that our services mesh well with, when it comes to continuity, but, but also what a consultant would do and, and support through that whole process.  

So,  we’ll definitely get into that. maybe to start talking about trends and, and where we’re at today. What is the big takeaway from the deal flow and consulting you’ve done year to date? so, you know, if, if you’re looking at the headlines, from the industry press, there, there’s been an impression earlier this year and, and kind of throughout the summer that maybe there’s been a little bit of a slowdown in m and a activity.  

and I think there has been in some pockets, within our, our space, but, we are not seeing a slowdown at FB transitions. If anything, we will probably exceed the record number of m and a deals that we did last year, this year. still to be determined on that. But, I think when you’re looking at the headlines, you’re seeing the, the stories about the mega deals, the cis and the creative plannings and these Goldman type transactions, they’re not about the, the everyday advisor, the mainstream advisor, and the, you know, a hundred million dollars advisor that’s selling to a $200 million advisor, or the guy with a $25 million book of business selling to, you know, someone else or tucking into their business and having an equity exchange or doing a merger.  

Those all count, but they don’t get clicks. They don’t have, flashy press releases. So if you look at just that middle market of, of financial advisors, we are not seeing any slowdown in activity, and we’re not seeing much of a change in valuation. Awesome. yeah, and, and I, you know, our interest is really, I guess on both sides of, of the coin, you know, and you’d mentioned, you know, identifying, realizing, and building value inside of a firm.  

And we think of it, we, we kind of, we’re obviously an investment firm, but we’re really trying to help firms grow, and then ultimately realize their value. And so in some cases that might be, Hey, how can we put, how can we help you put processes and and practices into place that will help you, you know, in the short term, raise margins and do all those things, but over the long term make you a more attractive target for somebody else.  

But there’s just as much, if not more of the, Hey, how can we make you an attractive spot so that when you do come across a prospective, seller, you know, or somebody that’s interested in, in merging in, you know, how do you have the, the resources to compete with some of the larger players?  

And how do you have the professionalization of your firm, you know, to be more attractive. So I guess having that context of both sides, like from your standpoint, I’m guessing you see a lot more people tell you they’re looking to buy than looking to sell, and I’m just wrong, But Nope. what is, what is that ratio? And like, how, how often are people going through the entire process? Like somebody says, Hey, I’m interested. Go find, go find me a good advisor in this town. Yeah, it’s tough to do. but It is your Perspective there.  

Yeah. So, you know, like I said, we did over a hundred m and a deals last year. I think it was close to like 134, last year. you know, the, the number of sellers that we have to, the number of buyers is still probably about a 75 to one ratio buyers to sellers, excuse me. So you, you can assume, like, so the, the people who come to us and say, Hey, help me sell my business on the open market. I want to cast as wide a net as possible to make sure that I find the best possible fit for my clients, my staff, and then certainly to make sure that I’m, I’m myself and my, my estates taken care of.  

So, you know, on average, you know, there’s certainly times that that changes, but 75 buyers to every seller is about how many we see, inquire, to each of our listings. Now, some of those do fall through. and, and that’s something that I would certainly argue to advisors like going at this alone, you are far more likely to have your deal fall through.  

And the reason, because you’re going to experience what we call deal fatigue. And what happens is, and I talked to a guy about this just a couple days ago, who’s been doing it on his own, just buyer and seller found each other, and the seller finally said to the buyer, if you don’t have an offer in front of me by Wednesday, we’re off. ’cause they’re just so exhausted by this process in the back and forth. So, having someone like us come in and be that neutral, independent third party mediator and keep things on track and keep things relevant and, you know, dismissing things in the discussion that don’t belong there or are in the wrong place in the timeline, you know, some people do in due diligence at the wrong time or going too far too fast, whatever it may be, you, you’re more likely to see a deal fall apart, going at it on your own.  

we close about 87% of the deals that come our way, and it’s because we help keep them on track. Deals that don’t have professional support are probably closer to 50% completion.  

Is there, is there a typical, you know, you talk about fatigue, like is there a typical time on that these processes go through? Like, for you guys, I’m sure, I’m sure out in the informal world, stuff can, people can have informal talks for years, but like, what do you typically see when somebody says, Hey, we’re ready, we wanna engage you. What does that look like? Yeah, so I’ll give you two different answers. So if someone comes to us and says, you know, cast that wide net, help me find someone in the open marketplace. those from start to finish, from the time they sign an engagement agreement with us, to the time that we’ve got contracts written and the deal is done 150, 180 days, five or six months, somewhere in there.  

but that includes like a month’s worth of us, you know, doing evaluation, figuring out what the asking price is going to be and marketing the business and, and like filling out their kind of, their eHarmony profile, if you will. So we know that full profile of who the seller is and who they want their buyer to look like. Then there’s the whole vetting process and narrowing it down and l o i and due diligence and all those other steps.  

If two people come together, they’ve already met each other, they’ve known each other for a long time, they know they want to do a deal. know, those can certainly take that long as well. But generally they go much faster. Firms that have done, you know, multiple deals with us and kind of know our cadence and, and, you know, they’ve been successful acquirers. sometimes those get done in four weeks for someone who’s doing it for the very first time, and they might be having a little bit more back and forth, need more time to think about things.  

Those could go upwards of four months. The, The comment of deal fatigue makes me, just extra stressed about the, the idea of, you know, the, the client advisor relationship is obviously the huge, the, the biggest asset as part of the deal. And that deal fatigue could, could really, even if the deal gets done, could, could lead to, less patience as it relates to the transition.  

Would you agree with that? you know, and this is something it’s, it’s a good point, James. It’s something that we really look for and, and you know, in, in real estate they say it’s location, location, location. We tell our advisors it’s fit, fit, fit. The money’s gonna be there. Like right now, valuations are good, they’re as good as they’ve ever been. and that’s been the case for a couple years now. So you don’t really need to worry about getting a good, getting a good price for your business. It’s, it’s gonna happen.  

You’re gonna get multiple offers, they’re, they’re gonna be good to choose from. the, the challenge is, do you find someone that really is the best fit for you in terms of, you know, investment philosophy, you know, like this is something you guys recognize in what you do, that it’s really important, that, you know, everyone’s on the same page with investment philosophy. If you have two firms that have completely different, ways of going about that, or one firm’s all about asset management in-house, the other one wants to outsource it. One of ’em is all about, you know, financial planning.  

The other one doesn’t do any at all. Like, those deals aren’t gonna happen. Those are not good fits. So making sure that, you know, all those different boxes are checked and we’ve got kind of our list that we go through, that we make sure that the buyer and seller, you know, fit all these right criteria and, and are a good fit and the better fit they have, and the more guidance they’ve got going through it, it the better and longer we can hold off that deal fatigue. But eventually, yeah, everyone does kind of get a little exhausted by it. Once the deal’s inked though, that takes a huge amount