Financial Advisor Blog

Financial Advisor Succession Planning

Think about the future of your practice:

As a financial advisor, you spend your days planning for the future. The future of your clients, your family and your staff.  Just how much time have you really spent thinking about your own succession plan? If you’re like most financial advisors, the hours spent getting ready for when you retire are pretty minimal. Taking the time to focus on a succession plan now will make all the difference when it comes to creating a business that far outlasts your career.

Whether you’ve put off succession planning because you’re not close to being ready to retire, you don’t want to think about the day you leave the office or because you simply don’t think you’re ready. The time to start planning for the future is now. For some financial advisors, putting off succession planning is because valuations are too low. The idea of leaving the business you’ve spent a lifetime building is unthinkable. For many advisors, it’s the old story of the shoe cobbler who makes shoes for everyone in the village but whose children go to school barefoot. A common theme among advisors is although we all know what to do to help our clients plan their financial futures – our own businesses don’t get the same level of attention.

Step by step:

As a financial advisor, you are a fiduciary and that responsibility to take care of your client. Putting their interests above your own should last beyond the client’s lifetime, and the span of your career. Developing and communicating the details of a succession plan gives clients the comfort of knowing their portfolios will be taken care of. And it increases the value of the firm to potential future buyers. It also gives you and your staff clarity in identifying the objectives needed to take your firm to the next level and ensure its success. Developing a succession plan doesn’t have to be overwhelming. The process can be broken down into five simple steps:

  • Decide on an external or internal succession
  • Develop an overall succession plan with specific milestones
  • Choose a potential individual or firm as a successor
  • Create a structured agreement that includes a valuation of the firm
  • Map out the transition

See the big picture:

Over the course of the next several weeks, we’ll walk you through each of these steps in detail. You’ll get the tools you need to begin thinking about the long-term future of your business. And you’ll get the insight needed to begin putting your plans into motion. As you start to form the overall succession plan, there are several things to reflect on and begin to implement. Many succession plans take 5-10 years, but involve transitioning of some roles and responsibilities leading up to the final succession.

Thinking about several key factors now, you’ll have a better idea as to how you may want to structure your succession. Over the years, you’ve probably had numerous conversations with clients talking about their financial goals, fears, and desires for the future. When the focus is turned back on you do you have a hard time practicing what you preach when planning for the future of your business?

Develop your succession plan:

As you begin to think about developing an overall succession plan, think about what’s most important to you. If you’ve spent time developing a culture at your practice based on service to your clients, you’ll want to make sure that any potential successor will approach client relationships the same way. If taking care of your staff is an important factor, you’ll want to think about the value that they add to your business as you develop the succession plan. You’ll also have to spend some serious time reflecting on your wants and desires for the future.

What’s most important to you when it comes to your retirement? Are you looking forward to spending time with your family free from the daily hassles of a practice? Or are you wanting to stay somewhat “plugged in,” serving in a mentor role to those at your firm? By spending some time thinking about these issues, you’ll be able to develop clear goals and laser focus on your overall plan. The reality is that every advisor’s succession plan is going to continually evolve as your business evolves.

By thinking about the future now, you can begin to start seeing your practice with the end in mind. When your focus is on the future, you begin to recruit and retain the kind of talented individuals who one day may grow into your successors. Constructing a strategic plan with specific milestones, you can identify and strengthen areas where you need to improve, ensuring you’re hitting the goals needed to stay successfully on track.

 

Opinions expressed in this article are those of the author and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or a loss.

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