Years ago, the owner of a small insurance firm that was about to change hands came to the law office where Jere Doyle was practicing at the time.
The business owner “had the terms written down on a napkin,” Doyle, now an estate planning strategist with BNY Wealth, said, describing them as “like three bullet points.” After a year of complex negotiations involving the structure of the business entity and a letter of credit to finance the transaction, that napkin turned into “a closing binder that was probably three inches thick with all the documentation needed to close the deal,” Doyle said. That insurance firm was “a small business, but there was quite a bit of money involved,” he recalled.
For Doyle and other experts who help guide entrepreneurs through M&A deals (with a focus on wealth management implications and financial advisors’ business and professional development), the key takeaway from that episode is simple.
“The business owners are experts in what they do for their particular business,” Doyle said. “When it comes to selling a business, it’s a first-time event for a lot of people, and they don’t know how long it’s going to take and how complicated it’s going to be.”
READ MORE: How to unlock tax savings in incoming client portfolios
Certifiable business expertise
Advisors seeking to expand their knowledge of everything involved with succession planning — a key challenge for their profession itself, due to looming retirements — just picked up a new potential resource last month through a collaboration between training organization The American College of Financial Services and business strategy and technology firm RISR. The latter firm will now provide advisors and other wealth management professionals who complete the college’s “business succession planning certificate” program with a free detailed overview analyzing the valuation, risk and growth potential of one client’s business.
“Our whole belief and thesis is that business owners need better advisors, and the advisors that serve them need better tools and tech,” said Jason Early, the founder and CEO of RISR. “There’s often a knowledge gap. The American College is the mecca. There’s no better place to go for applied knowledge when it comes to all sorts of specialized planning.”
The tax, wealth, retirement, estate and even family dynamics and emotional issues involved with selling a private business demand careful planning. Advisors represent just one of the many professionals who may need to be tapped as part of the process, according to a June report on private business M&A deals by BNY Wealth. About 350 to 400 advisors have completed the college’s succession certificate program in roughly its first three years, and the new collaboration represents a further step into an area of professional development that could lead to a new type of certification in the future, noted Jared Trexler, a senior vice president and the chief marketing and strategy officer at the college
Despite the “alphabet soup” of hundreds of designations and training programs across the profession, there is a great amount of third-party research showing that “the services that advisors say they offer, and what clients actually experience is really different,” Trexler said of advisory firm menu items like business planning and succession. “They can actually deliver it with the confidence and competence to make a real difference in people’s lives.”
The advisors face possible competition for the business of private firm owners, as well as the need to cooperate with other professionals, BNY’s research showed.
READ MORE: What to expect in advisor pay in 2025
What the research shows
For its latest annual report on private business owner strategies, BNY commissioned The Harris Poll to do a survey, which polled a sample of 127 entrepreneurs across multiple industries and firm sizes who had either recently completed an M&A deal or would be considering one in the near future. In the survey, “financial advisors” rated as the second most commonly cited professionals among the “most influential advisors” in the sale. At 21%, advisors came in second to a more general “business advisor” at 23% that could be a wealth manager, certified public accountant, attorney or simply a professional “who’s had a long-term relationship with the business owner and is a trusted partner,” Doyle noted. Notably, advisors rated ahead of M&A attorneys (14%), trust and estate attorneys (9%), accountants (6%), friends and family (6%), consultants (6%), industry business peers (6%) and tax attorneys (5%).
The tax aspects of a deal represent just one component of the planning for it, albeit an important one, alongside questions like preparing for the sale, thinking about the post-transaction phase and how the M&A deal changes the business owner into an investor. However, 79% of the business owners said taxes either moderately or significantly affected their profits from the transaction. They used strategies that included income deferral and exclusion through an installment sale or qualified small business stock, generation-skipping methods and other estate-planning tools, trusts, business reorganizations and new entity classifications or charitable giving. When asked, “Looking back on the sale of your business, what would you have done differently?,” 40% of the business owners said they would have “engaged in estate and tax planning further in advance” — the most common response, the report said.
“Though it is not always possible, sellers should try to allow for at least a two-year runway to build a cohesive deal team that is in a position to develop an optimal tax strategy and make the right strategic decisions along the way,” the report said.
The findings explain why working with business owners on the sale of their firm is “a huge opportunity” for advisors, especially “if you’re in an up economy, which we are now and we have been for the past 15 years or so,” Doyle said. As the client is “going from an entrepreneur to an investor and it’s totally different,” they find value in the advice as they run the business, navigate the sale and figure out their plans following the closure and into their retirement, he said.
“You can advise somebody in multiple parts,” he said. “It takes not only education, it takes experience as well.”
READ MORE: Advisors clamor for estate planning tools as attorneys wave red flags
Filling a need and creating value
That potential business tied to many important planning complexities involved with an owner’s exit show why hundreds of advisors have taken the three courses required by the college to get the college’s certificate, a fully virtual program that starts at a price of $2,050 per class. The introduction last year of its “tax planning certified professional” program signals the demand from advisors and clients for more professional development training in the area, Trexler said.
“Advisors could no longer deny the fact that clients wanted tax planning advice and solutions from their financial advisor. They didn’t want to be shuttled off to their CPA,” he said. “I see the same thing happening here in business succession.”
Through its collaboration with the college and a lot of advisors and wealth management firms since launching last year, RISR aims to assist them in bulking up their services for business owners, Early said. The access to RISR’s metrics dashboard and a detailed report for advisors who earn their certificate will give them a means of demonstrating their added value to clients through results similar to what’s available through planning software. Often, that has amounted to a Microsoft Word document manually prepared by the advisor and their staff, he said.
“For 25 years now, advisors have had the tools to deliver financial plans to business owners,” Early said. “Now you’ve got a succession planning deliverable for business owners.”
In the past, gaps in training and technology have led some advisors to business owners “to treat that asset like any other on the balance sheet,” he said. More professional development and resources involving areas such as estate and legacy planning, retirement, insurance coverage, valuation, growth levers, capital financing, taxes and, of course, succession planning could enable more advisors and firms to address the needs of entrepreneurs.
“Not a single one of them isn’t thinking about forming a business owner strategy. The demographics won’t let them ignore it anymore,” Early said. “I’m betting our company on the fact that this is true, but I’m suspecting there’s a lot of demand there.”
