When many financial advisors decide to sell their practice, their focus understandably shifts to finding the right buyer and getting full value. In looking for the most compensation, however, they may not spend as much time as they should thinking about another important aspect – their role in the transition and possibly in the new practice.
Succession Planning by the Seller Can Ease the Transition
Disputes and stress in the transition process often arise out of conflicting ideas about what the selling advisor’s role should be. The buying advisor may expect the selling advisor to stay on and assist with the transition while the selling advisor may wish for a clean break. Conversely, the selling advisor may wish to stay on and the buying advisor may want to start fresh with the practice.
A selling advisor can ease the process by putting serious thought into succession planning, what they would like their role to be, and how long they would like that role to continue. An advisor should consider whether they’re willing to stay on and assist the new practice. If so, are they willing to stay on for six to 12 months? Or are they wiling to stay on much longer, like three to five years? What would they like their role to be? Are they simply wrapping up loose ends and helping retain clients or are they continuing to work fully as an advisor? Answering these questions before the sales process begins should help set expectations in the transition process.
A Selling Advisor Should Set Expectations With Buyer, Firm, and Clients
Once a selling advisor has considered succession planning and determined what they want their role to be, they should communicate that vision with every party involved in the process.
After a potential buyer has been targeted, the advisor should communicate his or her succession planning vision with that buying advisor. Setting expectations from the outset will remove the potential for dispute or conflict later. There shouldn’t be any mystery as to what the selling advisor’s role will be. If the buying advisor wants participation from the seller above and beyond the seller’s vision, that could be negotiating point for added compensation.
The next discussion should be with the advisor’s broker dealer. The broker dealer needs to know the advisor’s wishes so they can plan accordingly, but also sothey can assist in the process.
Finally, and maybe most importantly, the succession planning process should be shared with clients. A selling advisor has likely worked with many of the clients for years, so they may be surprised that he or she would sell the practice. On the other hand, just as they are planning for their own retirement, they’ll likely understand the seller’s wishes. By fully sharing the succession plan, clients will feel control over the process and be more likely to transition to the new advisor.
Selling a practice shouldn’t be a rushed or spontaneous decision. The more insight a selling advisor has about his or her own wishes, the more he or she can retain control over the process. As is the case with most things, clear and transparent communication with succession planning partners will only serve to ease the process for everyone involved.