Who will you pass your business to?

Succession Planning

Who will you pass your business to?

There are four main options for creating a succession plan, and each has benefits and drawbacks.

One of the most important things you’ll ever do for your practice – for your family, for your clients and for your colleagues – is plan for how you’ll pass it on.

If you’re in a position to select a successor, the task of choosing the right individual is a significant challenge, both professionally and personally. Depending on your situation, this could be your opportunity to watch a child come into his or her own, or it may be a reward for a longtime employee who invested years in helping build the practice. But even if it involves passing ownership to a willing buyer with whom there isn’t a long-term relationship, this decision is the lynchpin of your succession plan.

Here are the four main options available to you:

Transfer or sell ownership to a family member


  • Clients often favor the family succession approach because of the continuity and business legacy associated with it.
  • Relationship retention is among the highest of all succession methods.
  • You’ll have the flexibility to pursue multiple ownership transfer options including gifting ownership, utilizing trusts, outright sale or a private annuity sale.


  • If handled improperly, having one family member become the business successor may cause friction with others.
  • It may be difficult to keep business and emotion separate, and consequently, poor decisions might be made out of sympathy or a sense of obligation.

Transfer or sell ownership to a trusted colleague


  • By passing ownership to a younger advisor you’ve groomed for succession, you can ensure that your practice’s culture and standard of service won’t falter.
  • This option helps to ensure the comfort and confidence of your clients and the retention of those relationships.


  • In some situations, a younger associate may encounter challenges funding the buyout.
  • If a suitable candidate isn’t already working in the practice, it can take significant time to identify and successfully retain one.

Merge a practice with a new partner


  • For a solo advisor with no desire to seek out and affiliate a junior partner as the future owner of the practice, another independent advisor in the same geographic area may agree to enter into a working (versus legal) partnership despite maintain­ing separate practices with the expectation that each working partner will be the ownership successor for the other advisor without consolidating the practices prior to the ownership transfer.
  • You can establish a revocable trial agreement to test out the relationship before there is any formal agreement for the transfer of ownership.
  • Neither advisor incurs any operating expenses nor makes changes in his or her practice with this type of plan.


  • Finding the right working partner may prove difficult if not impossible in some geographic areas.
  • Partners may disagree and find themselves making certain concessions about the value of their practices.

Sell to an external buyer


  • Generally requires a relatively short transition period for the selling advisor.
  • Due to the transactional nature of these arrangements, this option may take less of an emotional toll on a selling advisor.


  • While due diligence is an important part of any succession or acquisition, it is especially complex when selling to a party affiliated with a different broker/dealer due to client privacy regulations.
  • With this type of sale, you may not be able to secure continued employment for your staff with the purchasing advisor, and it is less likely that all of your clients will be retained by the purchaser.
  • This option often requires more expert legal and tax advice on the various implications and proposed terms of the purchase.

These four approaches are by no means the only choices available to you, but most advisors find one or more of these strategies suit their circumstances. In making a decision on a succession strategy, it is important that you carefully weigh the benefits and drawbacks of each alternative. 

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