Ep 424: Executing A Successful Internal Succession Plan In The Private Equity Era Of Advisor M&A with David Grau Jr.

Financial Advisor Success

Michael Kitces

News, Business, Entrepreneurship, Business News

4.8 • 696 Ratings

🗓️ 11 February 2025

⏱️ 90 minutes

🔗️ Recording | iTunes | RSS

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Summary

David Grau Jr. is the president of Succession Resource Group, an advisory consulting and valuation business based out of Oregon that serves independent financial advisors with RIAs and broker-dealers. What sets David apart is his two decades of experience supporting financial advisory firms, which has allowed him to identify best practices for founders and successors navigating increasingly complex internal succession plans. This is especially valuable as founders face growing challenges due to frequent, high-valuation offers from private equity-backed acquirers.

Listen in as David shares best practices for preparing firms for internal succession, including establishing defined career tracks, organizing business metrics, and breaking ownership transitions into manageable tranches to ease financial commitments for successors. He discusses why internal successions remain viable—despite the allure of high valuations from private equity-backed buyers—highlighting how these deals often include challenging growth targets and less favorable terms hidden in the fine print. David also explains how preparing for internal succession can actually boost external valuation and why founders may find greater satisfaction in leaving a lasting legacy through their firm by transitioning it to internal successors.

For show notes and more visit: https://www.kitces.com/424

Transcript

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0:00.0	Welcome to the Financial Advisor Success Podcast, where you go behind the scenes with
0:07.1	financial planner, speaker, and consultant Michael Kitsis to hear stories of how leading
0:12.4	financial advisors navigated the inevitable challenges that arise on the path to success
0:17.4	and get insight from leading industry consultants about how to break through to the next
0:22.2	level in your advisory business. And now here's your host, Michael Kitsis. Welcome, everyone.
0:29.0	Welcome to the 424th episode of the Financial Advisor Success Podcast. My guest on today's podcast is
0:35.2	David Grau Jr. David is the president of Succession Resource Group,
0:38.7	an advisory consulting and valuation business based in Portland, Oregon that serves independent
0:42.9	financial advisors with both RAs and broker dealers. What's unique about David, though, is how
0:48.4	his two decades of experience supporting advisory firms has helped him uncover best practices
0:52.8	for founders and their successors
0:54.4	looking to execute internal succession plans. Even as those succession plans have become more
0:59.2	challenging in a time when founders so regularly feel a steady flow of inbound inquiries from
1:03.7	private equity back to acquirers, often headlining high valuation multiples. In this episode,
1:09.3	we talk in depth about the best practices that David
1:11.5	recommends to firms to start preparing in advance for internal succession, including creating
1:16.0	more defined career tracks and compensation structures, as well as gain the firm's business
1:19.8	metrics in order and even getting their first third-party valuation. How David advocates
1:25.1	for breaking up an internal succession plan into gradual tranches, for example,
1:28.7	starting out by initially selling an internal successor a 1 to 5% ownership stake and then
1:33.7	ramping the percentage up with each subsequent tranche over time in order to make the financial
1:38.3	commitment of doing so more palatable and financially feasible for successors.
	...

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