I blame Antiques Roadshow. You probably have at least a passing familiarity with this program, which always seems to air on the local PBS affiliate whenever I’m channel surfing. Here’s a typical scenario:
A dowdy resident of the city in which this week’s episode originates brings in a family heirloom or other strange object that looks like junk for appraisal. An antiques expert puts on a pair of glasses and examines the strange-looking object closely.
Expert: “What do you know about the history of this piece?”
Dowdy Resident: “Well, it’s been in the family for years. We bought it at a garage sale for 35 cents. We’ve been using it as a doorstop.”
Expert: “Well, if you look closely at that doorstop you’ve been taking for granted, you’ll see it’s actually a rare Florentine widget mold, signed by Leonardo da Vinci, himself. I estimate it would fetch $16 million at auction!”
My wife and I recently had an opportunity to have several items appraised at a local event. As we waited in line for our turn, memories of Antiques Roadshow moments like the one above went through our minds. We had brought along: (1) a beautifully engraved saber known to several generations of Ritchlins as “the Civil War sword,” (2) an ornate pitcher owned by my great-grandparents, and (3) a framed Civil War newspaper printed on the back of wallpaper during the fall of Vicksburg.
Our only concern was whether we should retire in the Bahamas or Tahiti after auctioning off our antiques. We needn’t have worried. Total estimated value of these family treasures: about $250 … if we could even find an interested buyer. Although our relics were priceless in terms of family sentiment, their actual value was a function of market demand.
That’s an important lesson for owners of mature financial planning firms to consider when making their succession plans. And no one explains why better than Joe Pitzl in this issue of the Journal. Those client relationships you’ve built over several decades? Dead weight if the clients are in retirement, some buyers might say. And that high minimum that guarantees you the most qualified clientele? Not very appealing to young planners whose passion is helping clients get established. The 70 hours per week you’ve dedicated to building your business? Maybe now you and your firm are literally inseparable—a problem for buyers.
In short, you might pay thousands of dollars to have someone appraise your firm, but in the end, your business is only as valuable as what up-and-coming planners are willing to pay for it. Before you dot the last “i” in your succession plan, you might want to talk to some of the individuals who actually will be doing financial planning in the coming decades. They may be willing to share ideas on how to make your firm more appealing to them. Otherwise, don’t be surprised if that valuable firm to which you’ve given your blood, sweat, and tears turns out to be an overpriced antique.