Grau Launches New Business Aimed At Broker-Dealers And Custodians That Want to Help Their Advisors With Succession Planning, Mergers & Acquisitions Hot

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In an interview, Grau says he launched the new firm to take advantage of an opportunity that FP Transitions was not able to exploit fully in the marketplace because of its business model: serving the needs of custodians, broker-dealers, and coaches that either don’t have the in-house staff or are not fully staffed to provide succession planning and advisor acquisitions services.

Grau says he’ll be signing on several new clients in the weeks ahead, though it might take a several months before he demonstrates that the business plan is sound.

At least one advisor, however, thinks Grau stands a chance of succeeding for two reasons: One, Grau developed relationships with the potential buyers of his services at the major broker-dealers and custodians while serving as head of corporate relations at FP Transitions. And two, the new business model calls for broker-dealers and custodians to purchase his services on behalf of the advisor instead of the advisor buying the service directly. It’s more of a business-to-business model than a business-to-end use model.

“David had forged some pretty tight relationships with some of the major broker-dealers in the marketplace,” said Marc Freedman, CFP, president and CEO of Freedman Financial.  “I think David is finding that he can make more money (with less work) on a retainer basis with B/Ds than he can by working with individual RIA shops or IBD who are looking to buy or sell a business.”

Grau, of course, has reasons why his new business could succeed. One is the growing demand for succession planning and mergers and acquisitions on the part of advisor-owners. The average age of an advisor is now over 55 and many owners plan to transition out of ownership in the next 10 years. Two, many advisors don’t have a succession plan in place, and need one. Three, he can either augment the existing in-house services that a broker-dealer or custodian provides or serve as the out-sourced solution. And four, he realizes that working with advisor-owners on succession planning and mergers and acquisitions is a very personal and idiosyncratic business. Very few firms will put a “for sale” listing up on an internet site, he says. Instead, he plans to work with owners, the vast majority of whom – call it 95% -- want to sell their practice to employees instead of an outside firm.

And for those firms that are looking to sell to an outside firm, however, Grau says he’s got experience helping those firms find the right fit, and that can be especially helpful in a world where there more than 20,000 buyers at any given time. (By the way, Grau says firms are fetching anywhere from two to three times gross revenue on a recurring basis right now.)

In our interview, Grau says advisor-owners who have clients moving into the distribution or decumulation phase of their lives should especially contemplate succession planning if they haven’t already. These advisor-owners could face falling revenue and rising margins as their older clients draw down the very assets under management that drive the firm’s revenues and demand financial planning services related to aging Americans. If advisor-owners aren’t able to replace those assets with those from younger clients, they might find themselves in a challenging position, Grau says. What’s more, Grau says older advisor-owners should consider – if they haven’t done so already – hiring next-generation advisors who can participate in the ownership of the firm, as well.

Grau, according to his LinkedIn profile, previously served as the senior vice president of FP Transitions, a company specializing in buying and selling financial service practices. As part of his role there, Grau ran company operations and was the company’s lead M&A consultant, developing many of the company’s services, contracts, and methods used today. Over the last decade, Grau has assisted hundreds of advisors and other professional service providers buy, merge, sell, and craft their transition plan for the sale of their business, helping clients with businesses ranging in size from $100,000 gross receipts to in excess of $10 million. Prior to this role, Grau served in the United States Navy.

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