State of Succession

One of the things all financial practices must prepare for is succession planning. It doesn't matter when you start planning because it is one of those things that is never too early to prepare for. There's no difference in what level you are at in your career. Succession planning is essential. You can be a senior-level advisor, a junior, or anything in between, but you need to think about the state of succession in your practice.

Lack of Succession Planning

We have come across so many different instances of succession planning scenarios in a variety of practices. There are the financial advisory practices that get off to an early start and find success quickly. That success does not guarantee a future for the company. Sometimes these practices leave the senior advisors working harder than they ever have when retirement nears. Lack of succession planning is a huge culprit in the scenarios where an advisor is working harder at the end of their career than they did initially. Maybe succession planning doesn't get developed early enough. Perhaps a firm hires a handful of junior level advisors before retirement. It's not uncommon for new advisors to struggle to establish personal relationships with clients. We all know that relationship-building in the financial world is a very delicate one that takes time. Maybe it's as simple as the client base has aged and more assets are going out every month than coming in. Sometimes, when clients recognize that retirement is near, they stop referring people to the business. Without solid succession planning, these scenarios aren't that far off base.

Early Succession Planning

Let's look at a scenario where someone does the due diligence of early succession planning. There are different types of business owners: some who work in the business and some that also work on it. The ones who tend to do both also seem to start their succession planning long before thinking about retirement. These types of business owners bring experienced junior advisors in early and nurture them. They take active coaching roles in developing their advisors, especially as it applies to client services and client acquisition. This approach creates time for clients to establish relationships and trust with the client base. When it's time to phase into retirement, there's a well-developed plan to establish client/advisor relationships. Early succession planning lays the groundwork for a seamless transition from one generation to the next.

Things to Think About

The ownership of the business isn't the only thing that transitions at the time of retirement. The management of employees and relationships of crucial clients is just as important as the job titles.

Great questions to ask yourself:

  1. Ownership: When will the ownership of the business transfer?

  2. Team management: When will the team management responsibilities transition?

  3. Client relationships: What can we do now to connect junior advisors to top clients?

Succession planning allows for a win-win situation for anyone that may be affected by the transition. Plan earlier than you think you need to. If you are reading this article, then you know you need to start your succession planning, do it.

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