The Impact of Market Dynamics on Financial Practices with John Poole

·32 min·3 clips

John Poole reveals why market turmoil could be the best time for advisors to make critical business moves.

The episode begins with Matthew Jarvis introducing John Poole, a broker who facilitated Jarvis's practice deal and many others. Poole starts by addressing current market turmoil, suggesting it might be a reason to make business decisions rather than hunker down. He recalls the 1987 market crash to illustrate rapid losses and connects this to advisors with significant market exposure. Poole explains how revenue drops translate into larger equity losses, using a $100,000 revenue drop equating to $500,000 in lost capital as an example. The discussion shifts to regulatory environments, noting that current tax laws favor growth but could change. Jarvis asks about internal succession deals offered by wirehouses, and Poole reveals they often pay 40% less than market value, detailing a $2 million revenue practice example where the spread is $4 million. Tax implications are explored, showing how ordinary income versus capital gains treatment can widen the gap further. The conversation moves to smaller advisors selling practices, with Poole warning about bank financing issues and default risks in friend-to-friend deals. He shares a cautionary tale of an estate receiving only $300,000 from a $2.5 million deal due to a buyer's cunning and lack of formal structure. Poole emphasizes that advisors often have too much net worth tied up in illiquid practices, akin to clients over-concentrated in single stocks. Partnership challenges are discussed, with Poole advising on the need for clear agreements before valuation to avoid disputes when offers arise. He notes that acquirers prefer dealing with one decision-maker and avoid messy partnerships or OSJ structures without equity. The episode concludes with Jarvis promoting Poole's market assessment service for advisors.

As heard by us

John Poole ties market turmoil to succession, taxes, and what an advisor's practice may be worth.

The Perfect RIA frames market turmoil around a more durable advisory question: what a practice is worth when its owner starts thinking about a deal.

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Why you'd press play

You want the tax math before an internal succession turns into an expensive surprise.

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