A lot of advisors say they have succession plans, but relatively few seem to have applied serious numbers to their contingencies and scenarios.
Investment News recently ran a survey and found out that 74% of the advisors they talked to have not had a third-party auditor determine exactly what their businesses are worth.
That's understandable given the informal benchmarks that have gotten popular in the industry: so many times AUM, so many times recurring revenue, and so on.
Probably every advisor could come up with a rough ballpark number for how much his or her business is worth.
But it raises the question of why they haven't gotten a formal dollar estimate. Are they too busy? Not willing to spend money on a third-party appraisal?
It strikes me that the firmer the number advisors have to work with, the better they can plan, grow, and make their businesses more valuable.
And in the short term, the estimated worth of the business plays into questions of insurance coverage and yes, the succession plan. Does the firm have the right amount of key person coverage? How much exactly will it need help prospective buyers finance the transition when the time comes?