Practice Guide :

Four succession planning tips that can help advisors initiate the process

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Succession planning is a vital task that is easy to postpone. While a recent survey by[1] found that a majority of financial advisors (64%) have a succession plan, a third of them do not. Perhaps even more surprisingly, 25% of advisors who are near retirement do not have a plan to transfer their businesses, according to a survey by Cerulli.[2]

Advisors, who spend their careers recommending that clients prepare for the future, know the value of planning. Still, it’s easy not to follow your own sage advice. If you haven’t initiated a succession plan yet, here are some general tips on the process that may help motivate you to get started.

1. Envision what you want your retirement to look like.

Deciding how you want to spend your retirement years will determine how you should transfer your business. If you’re looking forward to a life of leisure, travel, and spending more time with family, you’ll want a plan that will let you make a clean exit. Alternatively, if semi-retirement sounds more appealing, you’ll need a plan that will enable you to have a continuing role at your firm.

2. Consider the pros and cons of an internal vs. external successor.

An internal successor can increase the odds that the culture of your firm will endure. Your investment philosophy, the ways staff are treated, and the service levels clients receive will more likely persist with your hand-picked successor at the firm. The downside is that identifying and grooming a new leader for your firm takes more time. Still, extra time may be what you want. With an internal transition, you can gradually increase your successor’s ownership stake and responsibilities at the firm, while you phase out yours on a step-by-step basis.

Turning your firm over to an outside buyer can be less time-consuming, but you could have less control over what happens to the firm’s culture—and your business legacy—after the sale is complete. Having a continuing role at the firm as an advisor “emeritus” will also be less likely if new ownership takes over.

3. Consult a succession planning coach.

It’s worth getting tips from an advisor who has sold their business or anyone who has experience consulting owners on the sale of businesses. People who’ve been through it before can provide tips on issues you might not anticipate on your own. A succession planning coach, particularly one with valuation expertise, can help you determine the right price for your firm. In that process, they’ll help you weigh the value of all the key attributes of your firm, such as the revenue it generates, its growth trajectory, the talents of the existing staff, the profile of the client base, and the likelihood that the most valued staff and clients will remain with the firm after the leadership transition.

4. Determine when to communicate the plan and then be transparent.

Transitions can be unnerving for everyone, and especially for your staff and clients. You don’t want to cause undue worry by communicating your plan too soon. But once you’ve laid out your plan, and the transfer will be imminent, you’ll want to explain to your staff and clients what the transition will look like. With the staff, you’ll need to be clear about what the change will mean for their job security and potential job growth. You may be tempted to withhold some information but disclosing all the details that you can reasonably share will benefit everyone.

With clients, you’ll want to explain what the timetable for the transition is, what your objectives in selecting a successor were, who the new leadership team will be, and how the clients will be affected in terms of continuing servicing. Directing clients to FAQs on your website that address some of the most likely questions will help ease concerns about the qualifications and approach of the new firm leader, while also providing reassurances that there will be no major disruption to the service they have come to expect. Inviting clients to take action to find the answers will also prevent those who aren’t concerned from having needless worries.

Planning can help smooth any bumps in the road

Scottish poet Robert Burns was right, of course, when he observed that the best-laid plans often go astray. No matter how carefully you lay out the path ahead, a few bumps may occur along the way. A successor you’ve been training may change their minds about taking over the business. Your valuation expert may reveal your business isn’t worth, at the current moment, what you had expected. Staying on for a few years longer than you wanted may be necessary to get the business to the valuation level you’d prefer. It helps not to become overly discouraged by any setbacks. The good news is that getting an early start on your succession planning, and putting an end to procrastination, can help you better manage any surprises along the way.

[1] Survey Reveals Details About Financial Advisor Succession Planning – SmartAsset

[2] 25% Of Advisors Near Retirement Lack A Succession Plan, Cerulli Says (

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