Episode summary
The Remarkable Liquidity Of Financial Advisory Firms When Planning Retirement - Kitces & Carl Ep 188
Financial Advisor Success (Kitces)
· · Hosts: Michael Kitces, Adam Van Deusen · Guests: Carl Richards
Summary
The host and Carl Richards answer a listener question about planning for retirement as an advisory firm owner 10 years out. The core issue is not just personal retirement readiness, but what kind of exit the owner wants: preserving the firm’s legacy through an internal successor, or maximizing proceeds through an external sale. That choice drives almost every planning decision, from staffing and documentation to how early an owner should start grooming the next leader.
The host argues that the biggest valuation drivers are cash flow and transitionability, not headline revenue. For a solo practice, buyers care less about the owner’s personal growth rate and more about adjusted profits, client retention, systems, and whether another advisor can take over relationships cleanly. Carl Richards presses on the gap between internal and external buyers, and the host says that gap is often smaller than people think because external deal terms are frequently more complex than the headline multiple suggests.
The episode also pushes back on the idea that advisory firms are illiquid. The host says buyers remain plentiful, recurring revenue is highly transferable, and the math still supports deals in roughly the 6 to 9 times profits range for many firms. If an owner wants continuity of the firm’s philosophy, the host says they need to start internal succession early; if they mainly want a check, the market currently offers that path too.
Key takeaways
- The host says firm value is driven first by profits and cash flow, then by client transition risk, and only then by growth.
- For a solo advisor, the host says buyers usually discount the owner’s personal growth rate because the business is too tied to the founder.
- Carl Richards frames the planning question as a choice between preserving the firm’s legacy and simply maximizing exit value.
- The host says external buyers often headline big multiples, but the real deal terms can make the payout materially different.
- The host says many firms still trade around 6 to 9 times profits, with 2.5 to 3 times revenue often implied at typical margins.
Notable quotes
“the biggest question to me when I hear situations like Cheryl's is what it what is your vision about what's actually supposed to happen at the end”
“the fundamental crossroads question is is your vision at the end that the firm continues more or less as you built it or you don't actually care if your firm survives”
“buyers don't buy the average firm, they buy your firm”
“advisory firms are astonishingly liquid”
How the episode opens
Well, greetings, Carl. Hi, Michael. How are you?
You're good. You're very good. I'm good.
I'm very I'm very good. That's I'm I'm very I'm very good. I'm like we're getting into spring season.
Things things are starting to move. I'm I'm looking forward to spring conference season in May when all the conferences start coming and I like get to see lots of our listeners out there at various conferences. So, Speaking of conferences, that was fun doing Kitces and Carl Live.
Yes. Yes, for those who didn't get to see it, we did a live version of Kitces and Carl for FPA National Capital Area. There was an actual blue couch
That's right. That's right.
Sat on. How great was that? And got to talk through together.
It was It was pretty darn cool. Yeah, that was fun. That was fun.
So, uh you got like something like retirement on your mind or something. Yeah, so uh love love doing these questions that come in from folks who listen to the podcast. So, um I guess reminder to everyone if you would love us to do like your financial planning business practice management question, send it in to questions@kitces.com and uh you know, put Kitces and Carl podcast topic or something similar in the in the subject line so we make sure the the team routes it to the right place and I get to see what your topic request was and we are happy to take these and answer these.
Yeah.
The question we had from an advisor wrote in. Um we'll we'll call her Cheryl today. Uh so, Cheryl said I'm thinking about my retirement as an advisor 10 years out. Oh. I hired my own financial planner to do my This
Smart.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- firm valuation
- advisory firm liquidity
- retirement planning
- internal succession
- external buyer readiness
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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Financial Advisor Success (Kitces), this episode and its artwork belong to Michael Kitces. Octagon is not affiliated with the show; this page is an independent summary.
