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Opinion

Financial Advisors Build Lifelong Value Connections

February 15, 2018

Financial advisors often think of their role primarily as an investment advisor. The rare and precious advisor who goes beyond that, to help safeguard their client’s well-being in other ways, is guaranteed a lifetime of loyalty from their customers. For clients who are business owners, they often can be somewhat oblivious to market changes which can radically impact the value of the business they own. And that is in spite of the fact that their business is often the single most significant holding they have. The M&A market is constantly changing and in recent times has hit some all-time historic home runs in terms of business values.

Inclusion of focus upon the value of the business, in regularly recurring planning discussions, can create magnificent awareness of potential opportunities for business-owner clients.

Our firm represents sellers of businesses, and in the course of that work we have spoken to a number of investment advisors who we’ve found to be close to clients through the selling process. We asked them what they do that’s different from the advisor population at large, to nourish and support the potential for building and solidifying their asset base through the sale of a company.

Their insights and advice included the following:

The advisor who can really make a difference in the lives and financial well-being of their clients knows all about the interests and holdings of their clients. They know a business ownership interest exists; they generally know the size of the companies owned and the nature of their business. And they know something of the lifestyles and aspirations of their clients at this stage in their lives.

One such advisor who we’ve worked with, whose clients are consistently loyal and devoted to her, is a woman with what we would call a "mid-sized" financial advisory firm, which has become increasingly prosperous over the past decade. When asked about how it is she consistently seems to be so involved and so trusted -- and even so beloved by her clients -- she said simply, "The real difference lies in the distinction between a true ’wealth manager’ and someone who instead is just an ’asset manager.’ A wealth manager is generally aware of the entire financial well-being of their clientele, instead of just the listed assets on a beginner worksheet that the client hands over to them. If your client owns a business, this is likely to be a key element of their overall net worth. If that business becomes highly saleable, it can make an enormous difference in the well-being of your client, for many years to come."

The net result is wealthier clients for her firm and client loyalty that is second to none.

When an advisor has some real sense of what a client-owned business does, it opens the door for opportunities for the well-read financial advisor to notice trends and changes in the business markets which might have significant impact on their client. One advisor who referred a seller to us recently became intrigued initially when he read of another (larger) transaction in the industry, which the press said had sold for almost 1.5x gross sales. He knew the business was similar to and competitive with one of his client’s operations. He forwarded all the press he could find about the deal for his client’s information. The client appreciated the thought and asked if that sort of astounding performance might mean that he too could have similar potential. The advisor set up several follow-up meetings with us to explore the possibility. The timing was exquisite for that industry, and pricing in the end turned out to be truly phenomenal.

For the advisor who has a handful of businesses they wish to keep an eye on for clients, it can be very helpful to call your favorite business broker to probe general rule-of-thumb values for a given industry or a specific business "space."

All too often, investment advisors don’t really talk much about the operating companies their clients maintain and don’t really know much about owner intentions. The more the advisor has a solid "feel" for potential values, the more they can offer meaningful input, as the market segment gets "hot" for a someday potential sale.

The most astute and successful investment advisors see and realize the importance of business value to their business owner clients. They help their clients assess when the time may be right for a sale and helps them astutely and effectively gather resources for the sale of a lifetime. The right help in this endeavor adds value to the owner’s estate and builds loyalty to the advisor like nothing else.