The Efficient Frontier of Succession: Maximizing Practice Value Moderated By: Alois Pirker Aite Group Eric Brotman, CFP, AEP, CASL, ChFC, CLU, LUTCF Brotman Financial Brian Heckert, CLU, ChFC, AIF, QPFC Financial Solutions Midwest Stuart Silverman Fusion Advisor Network

Overview White Paper Project Commissioned and published by NFP Advisor Services Group and produced by Aite Group. Goal: to examine the current position of financial advisors in the area of succession planning, identify when advisors should take key steps in the succession planning process, and determine how buyers and M&A firms evaluate advisor practice values. Methodology Online survey of 228 practice owners conducted in March 2012. The data in this study has a 4-point margin of error at the 95% confidence level. Phone-based interviews with 10 M&A firms, consultants and strategic buyers focused on the financial advisor market.

40% of Practice Owners Plan to Transition Within 10 Years ... Source: Aite Group March 2012 survey of 228 practice owners

Around Half of Practice Owners Do Not Have a Succession Plan Source: Aite Group March 2012 survey of 228 practice owners

Internal Succession: The Most Popular Succession Scenario Source: Aite Group March 2012 survey of 228 practice owners

Learning From the Past: Client Retention is the Biggest Issue Source: Aite Group March 2012 survey of 228 practice owners

Succession Planning : Closely Linked to Understanding and Improving Valuation Source: Aite Group March 2012 survey of 228 practice owners

Practice Valuation Formula

Succession Milestones Around 10 Years Before Transition Consider the impact of succession on your clients Decide on an internal or external succession strategy Establish a detailed succession plan 5 to 10 Years Before Transition In the case of internal succession, hire the potential successor and define the length of the trial period. Calculate a practice valuation 2 to 5 Years Before Transition Consider handing over the practice to internal successors in several stages. In the case of external succession, practice owners should start the search for an external buyer In either case, a practice valuation should be produced Practice owners should also focus on getting their house in order. Adjust corporate structure.

Succession Milestones (continued) Around 1 Year Before Transition Make a final decision on who will succeed the practice owner and agree upon the terms of the practice acquisition. Develop a detailed plan that defines the steps of implementation for necessary technology and operations migration, and necessary product changes. Develop a communication plan to define how the succession will be communicated When introducing the successor to each client, conduct meetings similarly to how they have always been conducted with that client. Get client consent After the Transition The selling advisor could stay for a number of months, post-acquisition. Ideally, a departing advisor would continue to work in an ambassador role with his or her successor, providing the emotional connection with long-standing clients.

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