Even the most veteran advisors might be compromising the enterprise value of their businesses at the worst possible time: during the succession process, according to Liz Lenz, Managing Director of Practice Synergies & Enterprise Consulting at Concurrent Investment Advisors.
Succession planning involves much more than just handing over client relationships. Seasoned advisors bring Next Gen advisors into the business, assign them clients and help them become ingrained in client relationships.
But when these young advisors try to invest in the equity value of an advisory business, they may not be able to afford the maximum value of the firm.
We caught up with Lenz, who shares advice for both current owner advisors and rising successors.
WSR: What are some common ways seasoned advisors unintentionally compromise the enterprise value of their firm during the succession planning process?
Lenz: I typically see three common mistakes. The first is putting off succession planning until the end. Less time leads to less options in exploring ways to maximize firm value.
Another major oversight is dependency. When client relationships revolve entirely around one individual, the firm’s value is tied to that person rather than the enterprise. The most attractive practices have repeatable processes and established teams, not personality-driven success.
Third, to build a durable business, you must retain and reward top talent. However, the misstep is when advisors continually increase salaries instead of considering incentive compensation structures that align staff efforts to the practice’s profitability. Rewarding talent isn’t just about compensation; you must create a path to ownership.
Rewarding talent isn’t just about compensation; you must create a path to ownership.
WSR: Are there any behavioral elements that play a part in diminishing the firm's value or limit Next Gen advisors from taking over?
Lenz: Absolutely. Behavior and mindset are often the hidden drivers or destroyers of enterprise value. Many advisors have built their businesses through control and precision, but those same traits can make it difficult to delegate or empower others. The unwillingness to let go, even of small decisions, limits the second generation’s (G2’s) ability to step into ownership and leadership roles.
There is also a limiting belief around equity. Some founders view equity sharing as giving something up when, in reality, it’s a way to align and multiply value. When Next Gen leaders are given a true stake in the outcome, their engagement, accountability and performance naturally increase. The most successful transitions happen when founders shift from being the hero to building the team.
WSR: With many Next Gen advisors struggling to afford the full value of the business they are inheriting, how can senior advisors structure succession plans to balance affordability for successors with maximizing the value of the practice?
Lenz: Equity should be bought, not given. With rising multiples and current interest rates, creativity in capital structures becomes essential. The traditional model, where G2 takes on debt to buy out the first generation (G1) at full market value, can be financially suffocating. We help advisors explore options such as external capital partnerships, minority buy-ins or phased transactions that provide liquidity to the founder while keeping the firm financially healthy for the next generation.
With rising multiples and current interest rates, creativity in capital structures becomes essential.
Through Concurrent’s partnership offering, advisors can sell a minority portion of their firm at an institutional multiple while allowing G2 to buy in gradually without overwhelming debt. It is about creating optionality and sustainability rather than forcing a single transaction that limits future growth.
WSR: Most legacy advisors view their businesses as a one-time sale opportunity. How would you help them reframe that thought process?
Lenz: We encourage advisors to view succession as a journey rather than a single event. The best outcomes happen when succession is not seen as a finish line but as an ongoing process of transferring leadership, building value and sharing in that value creation.
When you align capital structure appropriately, you can unlock partial liquidity while maintaining control, participate in future growth and preserve the entrepreneurial independence that made your firm successful in the first place. The key is partnering with an organization that has long-duration capital and a shared commitment to sustaining advisor ownership. That type of partner can facilitate phased liquidity events over time, rather than forcing a full sale that removes you from the business you built.
WSR: Lastly, what advice would you give to a successor to continue building a durable business in the face of industry consolidation and the talent gap?
Lenz: My advice to successors is to act like an owner before you are one. Do the work even when not asked. Learn how to lead others, especially when they don’t report to you. Learn the economics of the business, not just the client relationships. Use technology and partnerships to expand capabilities and service for clients. Your credentials won’t build enterprise value but your ability to increase net new assets and profitability will.
Act like an owner before you are one.
Be a student of the business. Firms that thrive during consolidation are those that combine professional discipline with a culture of growth and adaptability. The changes in this industry aren’t slowing down – they’re just getting started.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
