Succession Success3 Tech Trends That Increase Business Value
Tim Welsh, CFPPresident, Nexus Strategy, LLC
Agenda
Industry Landscape
Increasing Business
Value
Technology Trends
Integration
Workflow Automation
Document Management
Questions?
Industry Landscape
‣ ½ of all advisors are over 55 ‣ Less than 1/3 have a plan in
place ‣ Lack of planning is creating
urgency‣ Why?
• It takes 5-10 years to implement a succession plan
Components of a Succession Strategy
‣ Business that’s transferable• Ownership• Management• Clients
How? Solid Infrastructure
‣ Systems in place‣ Organized client records‣ Technology‣ Streamlined back office
The Value of a Transferable Business
‣ Technology ROI Study‣ Document Management Efficiencies
• Space• Compliance• Back office
Document Management ROI
‣ Establish compliance processes and reduce costs
‣ Enhance productivity‣ Reduce overhead‣ Streamline workflow‣ Make life fun again
The Search for ROI
‣ Three areas of cost savings:• Space efficiencies• Back-office efficiencies• Compliance efficiencies
‣ Increase in Business Value• Multiples of cash flow
Income Statement Approach
Revenues
- Comp Expenses
= Gross Profit
- Non Comp Expenses
= Operating Profit
100%
44%
56%
42%
14%
100%
44%
56%
33%
23%
Industry Benchmark DM Firms
9% improvement
Source: ROI for RIAs – Laserfiche Industry White Paper
Business Value Approach
‣ Ownership transitions increasing‣ Many ways to value an advisory firm
• Revenues• Cash flow• Business model• Infrastructure• Location, etc.
‣ Preferred method is to use multiples of cash flow• Range from 3 - 12
Business Value ROI
Size of Firm $500,000 $1,000,000 $4,000,000
Multiple on cash flow
5 7 10
Increased net income
$43,000 $89,000 $342,000
Net value increase
$216,000 $626,000 $3,421,000
Source: ROI for RIAs – Laserfiche Industry White Paper
ECM ROI Summary
Source: ROI for RIAs – Laserfiche Industry White Paper
Firm Size $500,000 $1,000,000 $4,000,000
Technology Investment
1.4% 2% 1%
Staff Savings 1000 hours0.4 of FTE
1500 hours0.6 of FTE
6000 hours2.4 FTEs
Overhead Savings
8.6%$43,000
8.9%$89,000
8.6%$342,000
Profit Increase 41.2% 55.9% 40%
Net Value Increase
$216,000 $626,000 $3,421,000
The Technology Trends
‣ Technology integration• 20% more annual income and
30% higher operating profit
‣ Workflow Automation• Back office savings – 5% of
revenues
‣ Document Management• Overhead savings – 9% of
revenuesSource: Investmentnews 2013 Technology Study, AITE RIA Productivity Whitepaper, and Laserfiche Industry Whitepaper
Conclusion
‣ The time is now‣ Increased business value
awaits‣ Invest in technology to drive
systematization and efficiencies
‣ Create a transferable business
Questions?