Book Briefs

Succession Planning Tips for Financial Advisors

By November 20, 2020No Comments

Living in the moment might be a great way to avoid stress, but it doesn’t apply to all things in life. Financial advisors understand this. Our job is to look into the future, predict probable market trends, and plan for the comfortable retirement of our clients.

Have you taken that same approach with your own future? Many advisory firms fail to create a succession plan until circumstances dictate that one needs to get done. That could be a few years before retirement or perhaps when planning a transition to another profession.

In this article, we present several scenarios where having a succession plan in place would be beneficial. We also list the steps you can take to ensure you’re ready for these situations. It’s never too late to start planning. As you often tell your clients, “Life is unpredictable.”

Need assistance putting together a viable succession plan? Contact Northstar Leadership today to schedule a free initial consultation with an experienced financial advisor coach.

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Succession Planning for Retirement

The first step in planning for retirement is to create a personal vision for what that looks like. Will you be leaving the business entirely or simply taking a back seat and letting others run your practice? If so, who will those people be? Someone has to protect the interests of your clients.

Your personal plan should also include a target number for retirement. What do you need in terms of assets to live the lifestyle of your choice? Make sure you hit that goal before sailing off into the sunset.

Once your personal goals have been established, create a succession plan for your business. This could be as basic as compiling a list of other advisors to refer your clients to or bringing on a partner or junior associate to run your firm when you’re gone.

Succession Planning for an Early Exit

Retirement isn’t the only way to leave our profession. Advisors often get more lucrative offers in other fields or choose to leave to pursue new interests. These opportunities may come on suddenly or they could be part of a larger strategy. Either way, you should have a plan in place for them.

Established advisors, unfortunately, sometimes don’t address this and find themselves stuck when new opportunity knocks. Many enter the business expecting to stay through retirement and don’t consider any alternate scenarios. You should always have a Plan B.

Succession Planning for M&A Opportunities

Developing a succession plan for an M&A opportunity is a different animal. If you’re selling your practice, your clients will need to be informed and assured that their needs will be taken care of. There’s a strategy for that. Most people don’t like change, particularly with their finances.

Timing is critical in these situations. Obviously, you don’t want to disclose the deal too soon, but the buyer needs assurances that clients will stay on after the terms have been agreed to. Client assets determine the value of your business, so retention is relevant.

Larger firms often leave key personnel in place after a merger or acquisition to make the client transition easier. The exact details of this can be discussed with the buyer, but it doesn’t hurt to have a framework in place that everyone can work with. That should be part of your succession plan.

Succession Planning for the Unexpected

Premature death and debilitating disease are two situations none of us like to contemplate, but the reality is that either can happen to us at any time. Just as we recommend insurance to our clients, we should have protections in place for our business.

This goes above and beyond protecting our loved ones and making sure family is taken care of in the event of death or illness. Our clients need to be brought under that protective umbrella as well. How will their needs be addressed in the event of our sudden departure?

Solo advisors struggle with this. Retirement is something they can plan for. Bring on a junior advisor or partner to take over once you’re gone. The unexpected does not afford that luxury. That doesn’t mean you can’t prepare for it. There are ways to ensure your firm lives on.

Work with a Financial Advisor Coach

If you’re struggling with your financial advisor succession plan, contact Bill Edmonds at Northstar Leadership today. Every business is different, and there’s no one-size-fits-all approach to succession planning. You and your clients deserve to have peace of mind in this area, so let’s work together to nail down a plan for your eventual exit.

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