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?