Passing The Torch

Succession Planning

Passing The Torch

Any good succession plan hinges on answering four simple, but often far-reaching, questions.

As a financial advisor, you’ve spent an entire career helping countless clients plan for retirement. But have you spent time planning for your own? If you’re like 70% of your peers, you’ve probably spent less than you should. Just as you’d encourage your clients to develop a thorough plan as early as possible, you should do the same for yourself and your business.

Let’s start by answering these four questions:

WHY – Retirement is a primary driver, but there are others, including protecting your legacy; preparing for the unexpected; ensuring business continuity for your clients, employees and partners; and ensuring you and your family feel fulfilled when you’re ready to step down.

HOW – You have several options when it comes to the structure of your succession plan and transferring your client relationships; some of your options will be limited by your affiliation with your broker/dealer. Independent advisors, for example, have complete control to structure a plan that maximizes benefits and minimizes the impact of taxes on the sale proceeds. However, this flexibility and personal control over the succession plan also means a great deal more responsibility for the plan’s implementation.

WHO – Selecting the right individual is a significant challenge, both professionally and personally. Depending on your situation, this could be a child, a longtime employee or a third-party buyer. Just be sure to spend time finding the right steward for your business.

WHEN – While conventional wisdom sets the ownership transfer starting line about five years before your planned exit date, most experts recommend allowing more time. Even if you’re not sure of an exact date you plan to exit the business, take your best guess. It’s much easier to delay implementing your plan than to create one at the last minute.

As you draft your succession plan, be sure to consider:

  • Your timeline
  • The culture and history of your firm
  • Benchmarking your practice to find strengths and weaknesses and determine a reasonable market value
  • Standardizing procedures and processes to create minimal disruption to your clients and staff
  • The impact of the proceeds on your retirement income plan
  • Transitioning your clients and staff
  • Managing the change
  • Informing your broker/dealer of your plan
  • The financial terms you’re seeking if selling to a third-party purchaser
  • What you’re looking for in an internal or external succession candidate
  • Keeping your expectations realistic

A successful succession

Even if retirement is less than five years away, it’s never too late to create a succession plan – and it’s certainly never too early. Most financial advisors will find it helpful to take advantage of the succession planning resources or programs their broker/dealers have to offer. For instance, advisors at Raymond James receive assistance with valuing their practices and screening potential successors or buyers. It also can prove valuable to engage an outside consultant with expertise in succession planning or to simply reach out to friends and colleagues who’ve already gone down this road. 



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