Accredited Wealth Management Advisor Practice Exam

According to John Brown, what is the most commonly used exit planning strategy?

1. Insider transfer.

2. Transfer to children.

3. Third-party transfer.

4. ESOP.

The correct answer is: Insider transfer.

The most commonly used exit planning strategy, according to John Brown, is an insider transfer. This approach involves transferring ownership of a business to individuals who are already involved in the company, such as employees or management. Insider transfers can provide a smoother transition since these individuals are often already familiar with the business operations, culture, and challenges. This strategy allows for a continuous operational flow, as the business can maintain its existing management style and customer relationships. It also offers the business owner the opportunity to mentor the new owners, ensuring that the company's legacy and values are upheld. In many cases, this method is seen as less risky compared to other options, as it can lead to stability and continuity for both the staff and customers following the ownership change. While other options like transferring to children, third-party transfers, and ESOPs (Employee Stock Ownership Plans) are viable exit strategies, they may come with unique challenges, such as family dynamics, establishing the right market value for a third-party sale, or the complexities of setting up an ESOP. These factors contribute to the prevalence of insider transfers as a preferred exit strategy among business owners looking for viable succession solutions.