Insights from Tim Welsh, President of Nexus Strategy

1. Succession Success
3 Tech Trends That Increase Business Value
Tim Welsh, CFP
President, Nexus Strategy, LLC

2. Agenda
Industry
Landscape
Increasing
Business
Value
Technology
Trends
Integration
Workflow
Automation
Document
Management
Questions?

3. Industry Landscape
‣ ½ of all advisors are over 55
‣ Less than 1/3 have a plan in
place
‣ Lack of planning is creating
urgency
‣ Why?
• It takes 5-10 years to implement
a succession plan

4. Components of a Succession Strategy
‣ Business that’s transferable
• Ownership
• Management
• Clients

5. How? Solid Infrastructure
‣ Systems in place
‣ Organized client records
‣ Technology
‣ Streamlined back office

6. The Value of a Transferable Business
‣ Technology ROI Study
‣ Document Management Efficiencies
• Space
• Compliance
• Back office

7. Document Management ROI
‣ Establish compliance processes and
reduce costs
‣ Enhance productivity
‣ Reduce overhead
‣ Streamline workflow
‣ Make life fun again

8. The Search for ROI
‣ Three areas of cost savings:
• Space efficiencies
• Back-office efficiencies
• Compliance efficiencies
‣ Increase in Business Value
• Multiples of cash flow

9. Income Statement Approach
Revenues
- Comp Expenses
= Gross Profit
- Non Comp Expenses
= Operating Profit
100%
44%
56%
42%
14%
100%
44%
56%
33%
23%
Industry
Benchmark DM Firms
9%
improvement
Source: ROI for RIAs – Laserfiche Industry White Paper

10. Business Value Approach
‣ Ownership transitions increasing
‣ Many ways to value an advisory firm
• Revenues
• Cash flow
• Business model
• Infrastructure
• Location, etc.
‣ Preferred method is to use multiples of cash flow
• Range from 3 - 12

11. Business Value ROI
Size of Firm $500,000 $1,000,000 $4,000,000
Multiple on
cash flow
5 7 10
Increased
net income
$43,000 $89,000 $342,000
Net value
increase
$216,000 $626,000 $3,421,000
Source: ROI for RIAs – Laserfiche Industry White Paper

12. ECM ROI Summary
Source: ROI for RIAs – Laserfiche Industry White Paper
Firm Size $500,000 $1,000,000 $4,000,000
Technology
Investment
1.4% 2% 1%
Staff Savings 1000 hours
0.4 of FTE
1500 hours
0.6 of FTE
6000 hours
2.4 FTEs
Overhead
Savings
8.6%
$43,000
8.9%
$89,000
8.6%
$342,000
Profit Increase 41.2% 55.9% 40%
Net Value
Increase
$216,000 $626,000 $3,421,000

13. The Technology Trends
‣ Technology integration
• 20% more annual income and
30% higher operating profit
‣ Workflow Automation
• Back office savings – 5% of
revenues
‣ Document Management
• Overhead savings – 9% of
revenues
Source: Investmentnews 2013 Technology Study, AITE RIA Productivity Whitepaper, and Laserfiche Industry Whitepaper

14. Conclusion
‣ The time is now
‣ Increased business value
awaits
‣ Invest in technology to
drive systematization and
efficiencies
‣ Create a transferable
business

15. Questions?