Many individuals who operate their own registered investment adviser firms have a tendency to delay succession planning and deal almost exclusively with shorter-term business issues. However, succession planning is a critical issue, in particular, for a small registered investment adviser firm due to the risks that one key investment adviser representative could become unavailable, on either a temporary or permanent basis, to serve clients and operate the registered investment adviser firm. In the interest of both the investment advisory practice and its clients, it is critical to plan for continuity and succession of the registered investment adviser firm.
Ideally, a registered investment adviser’s business succession plan should be in place well in advance of any investment adviser representative’s planned or unplanned departure from the investment advisory practice. There are several components that comprise a successful succession plan, such as: (a) creating an ideal scenario for departure of the investment adviser representative; (b) identifying and evaluating potential buyers or other successors; (c) deciding how the registered investment adviser firm’s responsibilities will be distributed to the successors; (d) if necessary, determining who will mentor the successors; (e) determining the value of your registered investment adviser firm; and (f) addressing tax implications of the succession and implementing strategies to reduce taxes.
Particularly, with respect to creating an ideal scenario for planned or unplanned departure of any investment adviser representative and in determining the value of your registered investment adviser firm, it is critical to be aware of financial industry regulations and requirements affecting a registered investment adviser. These include FINRA’s Continuing Commissions policy and corresponding SEC guidance regarding continuing commissions for registered representatives of a broker-dealer; the privacy policies of relinquishing and receiving firms and custodians if the succession plan will involve a change of the actual investment adviser firm entity or the custodian for client accounts; licensing and registration requirements for the investment adviser firm and any affiliated investment advisory representatives; assignment provisions of the Investment Advisers Act, restrictive covenants, such as non-solicitation or non-compete agreements, affecting the investment adviser representative and/or intended successors; and continuity of existing business contracts.
For more information and guidance about the regulatory considerations when planning for succession within your registered investment adviser, purchase a webinar seat for “Planning for Succession” sponsored by RIA Compliance Consultants and presented by our affiliated law firm, Bryan Hill Attorney at Law, on Tuesday, September 8, 2009 from 12:00 -1:00 p.m. Central Standard Time. The charge for this webinar is $59.95.
Purchase for $59.95 your webinar seat now: www.RIA-Compliance-Consultants.com/webinars
Posted by Bryan Hill
Labels: Assignment, Succession Planning, Webinar
