For years, experts in the industry have articulated the risk of not having a succession plan in place. These risks include that advisors cannot realise the value of their life’s work, a lack of continuity for clients, and a risk for employees in regards to their long-term employment. Nevertheless, there are still many financial advisors that do not have a succession plan in place. There are many reasons why today should be the day you put the wheels in motion; not only does succession planning protect owner equity and enhance business continuity, but it can also increase the value of your firm. Read on to discover how.
Don’t plan for continuity – plan for change
One mistake a lot of financial advisors make is assuming that a succession plan is a continuity plan. They believe that if they select a buyer to take over their position in the case of their exit from the business, the job is done. But, that is not the case. A succession plan is designed to make sure that the company remains a sustainable entity once an owner or owners are gone, which will make your financial firm a viable long-term option for buyers, and push the value up. These plans will include details such as a contingency plan if the initial one goes off track, transition of responsibilities and roles, and owner criteria.
Lower risk = better value
By having an effective succession plan in place, you can almost certainly increase the value of your firm because you will be able to lower risk, which in turn fuels growth. You should view the succession plan as more of a business partnership with the contributors to the firm as opposed to an agreement. As is the case with any type of business partnership, succession plans need to be reviewed to make certain that successors are able to meet future commitments, especially if they intend to purchase equity. This will ensure that risk is effectively managed for the buyer, which in turn drives value up.
Attracting better advisors will sweeten the pot
Succession planning also offers additional benefits when it comes to selling your business. This includes the fact that it can grow relationships with existing clients and attract new clients. You are more likely to attract younger clients that are in the mode of accumulation if you have a comprehensive succession plan in place. This reassures these clients that your financial advisory practice will have a next generation of advisors set up to make sure that all of their requirements are catered to in the long run.
If that was not enough, you can win the race for human capital with succession planning in place. This is because there are not a lot of companies that have identified career paths for their teams. By having a succession plan in place, you will have done this, which is especially important because there is a high demand for leading advisory capital. And, by doing so, you will put yourself in the best position to acquire the talent to become your potential successor.