Who Comes Next?

Financial advisors often help clients build retirement and succession plans, but don’t have a plan for their own succession. In fact, according to research conducted by the Financial Planning Association in 2018, just 27% of financial advisors have a plan for transitioning their practice when they retire.1

WHY IT’S IMPORTANT

For retirement and in the event of unexpected illness or departure, it’s essential to have a plan in place to ensure business continuity for four main reasons.

1. It Ensures That Clients Receive Uninterrupted Service

This is critical to maintain trust and loyalty among clients, who rely on you for your advice and guidance. If you’re on the back half of your career, it’s only a matter of time before clients start wondering, “What happens to us if something happens to you?” It’s essential to get ahead of this question and share your plan to maintain sound relationships.

2. It’s Important for the Long-Term Viability of the Firm

A well-designed succession plan helps preserve the value of the enterprise you’ve worked to build and ensure it continues to thrive beyond the departure of its founder or key team members. This can be particularly important for smaller firms or those with a strong personal brand.

1 www.financialplanningassociation.org/sites/default/files/2020-05/The-Succession-Challenge-2018-White-Paper-sm.pdf

2 www.advisorsmagazine.com/trending/23521-aging-advisor-workforce-highlights-need-for-succession-plans

3. It Can Help to Ease the Transition Process for Clients, Staff, and Successors

By offering transparency and creating a roadmap for the future of the firm, succession planning can help minimize disruption and uncertainty.

4. It Allows You to Maximize the Value of Your Business

As a for-profit entity, you owe it to yourself to make the most of everything you’ve created. Your business is an important retirement asset, and perhaps even a legacy asset, so it’s crucial to put the proper people, process, and systems in place to enhance value.

Where To Start

A comprehensive succession plan requires many detailed steps, but here are six to get you on the right track.

1. Start Early

Ideally, succession planning should begin several years before you plan to exit the firm. There are many decisions to make that will affect your firm’s value, client relationships, staff job security, and your lifestyle. Beginning the process well in advance will give you time to identify potential successors, train them, and prepare them for leadership roles within the firm. It will also make it more likely you’ll achieve your goals.

2. Define Your Vision

You can’t hit a target you can’t see. When you’re clear on your vision and goals, your brain starts to know what to look for and finds resources all over the place to help. Most advisors we work with haven’t sat down to think about the desired future state of their business or their personal life. Take some time to consider and document what really matters to you. These questions can help you get started on defining your vision:

• Do you have a sense of what you want the future to look like for your business? What’s happening? What kinds of clients? What kind of team? What kind of experience or impact?

• How would you know if you created a successful business?

• If you were guaranteed to succeed at building the business you really want for the future, what would you do?

• What are five things about your business that you want to be proud of in the future?

• What is it that you want the business to have, be, and do?

• What will be happening in the business in 10 years? What won’t be happening?

Review your answers and consider this: is this really what you want? You’re going to pay for it in time, money, attention, relationships, and energy. You’re going to trade whatever future you’re pointed toward for the future you’re mapping out, so take the time to get really clear about what it is you want to achieve.

3. Emphasize Repeatability

“Again” is the shortcut to excellence. Have you ever been accused of stopping something that worked? Are you guilty of saying, “this client is different, an exception”? Repeatability is key to growth and creates operational efficiencies for your business. Without processes, you can’t measure results or know what needs to evolve. You need to systematize how you meet, engage, onboard, and secure clients for generations. Successors will want to see if your firm’s processes are consistent, streamlined, documented, and scalable. Too often firms build their business around a lead advisor’s ability to engage clients, without standardizing that proven process. Take time to document the most common repeatable actions in your business.

4. Identify and Develop Potential Successors

Identifying potential successors can be challenging, especially for smaller firms. Aside from technical skills, look for someone with leadership potential and a cultural fit with the firm and your clients. Once you’ve identified potential successors, focus on developing their skills and provide them with opportunities and a clear path to succession.

Here’s why this is so critical: according to Cerulli Associates, about 10% of wealth managers are under age 35, while the average age of wealth advisors is 51. Furthermore, 38% of advisors expect to retire within the next 10 years.2 We see this gap as a significant challenge. We encounter situations all the time in which future successors are doing side-by-side comparisons to evaluate firms they want to join for succession purposes. Who has the upper hand?

While some firms have potential successors on site, in many cases it’s necessary to look outside the firm. Consider options such as mergers, acquisitions, or partnerships with other firms to help identify and create potential successors.

5. Communicate with Clients and Staff

Communication is key when it comes to succession planning. Discuss your plans with clients and staff well ahead of any changes. Happy clients mean long-term revenue and an overall healthy business for future successors, and that requires trust, transparency, and effective communication. Keeping staff in the loop ensures that everyone is on the same page and working toward a common goal.

6. Update Your Plan Regularly

As you’re already aware from the work you do with your clients, succession planning is not a one-time event. Regularly reviewing and updating your plan so that it remains relevant and effective will help ensure your firm is well positioned for the future.

Succession planning is not only about you and your future. It’s also about designing a future that will capture what matters most to you and seeing it continue forward in time. It’s about making an impact beyond you.