WEALTH ADVISORY SOLUTIONS Independent Advisor Platform Wealth Advisory

WEALTH ADVISORY SOLUTIONS Independent Advisor Platform

Wealth Advisory Solutions Independent Advisor Platform • • • Transition Support Compliance Software/ IT Administrative Support Business Continuity Planning Succession Planning www. Envision. RIA. com

Wealth Advisory Solutions Business Continuity Planning • Catastrophic Plan (Proverbial Bus Scenario) • Critical for Sole Practitioners and Key Relationship Personnel • Advisor Can No Longer Fulfill Their Duties (Death or Disability) • What Happens to Your Clients? Your Staff? Your Family? • Business Continuity Plan Provides • Peace of Mind • Client Retention • Organized Transition • Monetary Benefit to Family www. Envision. RIA. com

Wealth Advisory Solutions Succession Planning • Succession Planning • A process, not a transaction • Key Considerations • Why are you looking to sell? • Internal or External Succession? • What is your Timeframe? 19% of RIAs that generate between $150, 000$500, 000 in revenue have a formal succession plan • Primary Objectives of a Succession Plan • Create an exit plan for the owner • Ensure clients are taken care of • Secure the firms future www. Envision. RIA. com

Practice Valuation & 10 Steps To Prepare Your Practice To Sell Anthony Whitbeck, CFP, CLU CEO of Key Management Group http: //www. keymanagementgrp. com

Key Management Group Services Transitioning Team Practices All of KMG’s Services have been carefully designed to move advisor’s up the productivity curve and overcome the obstacles that are preventing maximum success. • • • Organization Systems Delegation AFA Analysis Acquisition Consulting Human Resources Practice Management Guardian/Continuity Planning Financial Planning Case Preparation Executive Coaching Deal Making Service Succession Planning Practice Protection Client Service Marketing Everything! Escrow Advisor Legacy Advisors w/Support Solo Advisors • • • CEO Thinking Brand Building Protecting Equity • • • Finding the Right Successor Deal Negotiation Transitioning Specialized Assessments • • • Business Valuations Online Assessment In-Depth Assessment Practice Protection Human Resources

Practice Valuation http: //www. keymanagementgrp. com

Why Financial Advisors Get Valuations Financial Advisors seek professional Business Valuations for many reasons, the most common are: • • Charting the value of your practice to measure growth Before entering a Buy/Sell Agreement Before dividing the practice between key members To facilitate succession planning discussions Acquiring a practice Securing bank financing And more…

Types of Valuations The reason WHY you are getting a valuation will determine the type of valuation that you need. The terminology and definitions are defined by American Institute of Certified Public Accounts (AICPA). Three Types of Valuations 1. Calculation Engagement • Most common • Calculated Value 2. Business Valuation • More in depth • Conclusion of Value 3. Other Appraisal • Least Common • Specific Situation Key Management Group offers all three types of valuations, plus special valuations for: • OSJs • Other Industries • Divorce Proceedings • Estate and Gift Tax • Owner Disputes • Partnership Equity Agreements We are a trusted valuation provider for bank partners: • Live Oak Bank • PPC Loan • Oak Street Funding • Salt Creek • Succession Lending

Valuations can range greatly based on several factors – “rule of thumb” metrics are inaccurate and unreliable There’s almost $400, 000 price difference depending upon whether it is a top 20% or bottom 20% practice. Numbers based on approximately 300 valuations performed in 2017 -2018

Planning How Is. Continuity Your Practice Value. Options Determined? Do you know the factors that influence the value of your practice? Market Approach Income Approach Value based primarily on the client group Value based primarily on business operations • Quality of revenue • Team • Client age • Systems • Asset Velocity • P&L • Discount Rate utilizing various risk factors inherent in your practice • Compared to benchmark

What. Continuity Drives Value in Your Practice? Planning Options Client Segmentation Basic Client High Value Client Affluent Client Item (Below $100 k AUM) ($100 k to $500 k AUM) ($500 k + AUM) # of Clients 44% 38% 18% % of Advisor’s GDC 7% 32% 62% Average Age 53 63 65 Average AUM $34, 739 $247, 445 $1, 248, 931 Average GDC $401 $2, 217 $8, 654

2018 Year-End Valuation Metrics Average Client Group GDC $5, 000 $4, 500 $4, 000 $3, 500 $3, 000 $2, 500 $2, 000 $1, 500 $1, 000 $500 $0 Average Client Group AUM $600, 000 $4, 312 $506, 688 $500, 000 $3, 602 $380, 514 $400, 000 $2, 405 $1, 400 Best $289, 730 $300, 000 Worst $189, 968 $200, 000 $100, 000 Best $0 Top 20% Average Median Bottom 20% Top 20% Recurring Revenue 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% Worst Average Median Bottom 20% Average Client Age 65 95% 63 60 88% 61 60 82% 57 55 71% 50 Best Worst 45 Worst Best 40 Top 20% Average Median Bottom 20% *All data presented based on a sample of 477 valuations run in 2017 Top 20% Average Median Bottom 20%

What Drive Practice Value – Up and Down? Top 3 Metrics That Drive Practice Value Up: • Recurring Revenue • Operating Profit • Revenue from High Value Clients Top 3 Metrics That Drive Practice Value Down: • Client Age • Number of Low Value Clients • Number of Professionals in Firm *All data presented based on a sample of 200 valuations run in 2018

Getting a Valuation A valuation will help you manage the equity in your practice and help you prepare months or years in advance of a sale. “Calculation Engagement” What you get: 5 $ Dual Methods • Market Value Analysis • Earnings-Based Analysis Customized assumptions based on key practice metrics 60 -Minute Consultation • Review of valuation • Actionable insights to achieve your goals 9 2 , 1 $ 895 Partner Firms:

To purchase an assessment – visit: www. keymanagementgrp. com • • • Easy to buy online Get instructions emailed right away Simple data collection process Results usually delivered in about a week 1: 1 Consultation with an M&A Experts to review

10 STEPS TO PREPARE YOUR PRACTICE FOR SALE Toll-free: 888 -848 -3349 info@keymanagementgrp. com www. keymanagementgrp. com

SELLING A PRACTICE IS AN EMOTIONAL JOURNEY THAT TAKES CAREFUL PREPARATION. Start preparation as far in advance as possible to ensure a smooth transition. • The clearer you are about why, how, what, and in what way you are selling, the higher likelihood of success. Sellers Checklist 1. Start with ‘why’ 2. Know your worth 3. Tell your story 4. Take inventory 5. Handle attrition 6. Segment & communicate 7. Log opportunities 8. List major expenses 9. Record business services 10. Make an org chart

1. START WITH WHY Have a clear understanding of why you are selling. • Complete a written statement of why you are selling and what your postwork goals are. Plan to share these statements with prospective buyers.

2. KNOW YOUR WORTH Complete a formal practice valuation. • This is a critical step to establish an expert opinion of the value of your practice and to provide many other data points for making informed decisions about the sale.

3. TELL YOUR STORY Write a message to buyer prospects. Write 1 -2 paragraphs for each item: • Description of your practice, yourself, and the type of buyer that you want.

4. TAKE INVENTORY Take inventory of client deliverables; especially financial plans that have been paid for but not delivered.

5. HANDLE ATTRITION RISKS Aging clients represents a risk of client/asset attrition. Demonstrating generational planning will reduce the risk perceived by the buyer. • Create a simple report for each ‘A’ client indicating ‘yes’ or ‘no’ for generational planning with a note about who is involved (children,

6. SEGMENT AND COMMUNICATE Segment clients for your transition communication and meeting strategy. • Talk to clients early about your transition plan and reassure them of the process.

7. LOG FUTURE OPPORTUNITIES Document future opportunities with existing clients. • These should be wellconfirmed opportunities or work-in-progress.

8. LIST MAJOR EXPENSES Create a detailed outline of all transferrable expenses. • This should list meaningful expenses like office lease (including terms), staff compensation, marketing, etc.

9. RECORD BUSINESS SERVICES Create a detailed list of all business/office services you subscribe to, their contact information and any terms of service. • Include items like phone service, equipment leases, etc.

10. COMMUNICATE YOUR ORG CHART Advisor Complete a staff overview document. Associate Advisor • This should include all staff, titles, duties, compensation, and your recommendations for retention. Licensed Staff Unlicensed Staff

Overview of how we help advisors find the right buyer on our Advisor Legacy™ platform. INITIAL CONSULTATION GATHER DATA IDENTIFY PROSPECTS INVITE BIDS CONDUCT INTERVIEWS Average time frame is 4 months Advisor Legacy fees range from 2. 00% - 6. 00% of the practices trailing revenue. MAKE DEAL

Wealth Advisory Solutions Key Take-Aways Implementing a Business Continuity Plan is Critical for Independent Advisors Understand What Drives the Value of Your Practice Succession Planning is a Process- Important Considerations if You Are Thinking About a Transition www. Envision. RIA. com

Questions? Wealth Advisory Solutions Ty Needler Ty@Envision. RIA. com 317 -559 -0687 Key Management Group Anthony Whitbeck, CFP, CLU awhitbeck@keymanagementgrp. com 248 -785 -3603 www. Envision. RIA. com

Schedule your free 30 -minute consultation today or take our free online assessment: www. keymanagementgrp. com 1 -888 -848 -3349 http: //www. keymanagementgrp. com Anthony Whitbeck, CFP, CLU CEO, Key Management Group O: 248 -785 -3603 awhitbeck@keymanagementgrp. co m