Succession planning – who will follow in your footsteps?

Advisers who have built up a successful practice over many years tend to have loyal clients and often do business so far as the third generations of families. Some advisers bring their children in to help take the business forward. However, not everyone is in this position. The question is then: what happens to the clients, the practice and the value of the business when an adviser can no longer continue???

Unfortunately, many excellent advisers who have been in the industry for many years operate without the ideal solution to these challenges. Without necessarily admitting this to themselves, they resist tackling succession planning. Because they are so dedicated to their work and their clients, they always find reasons why it can’t be done today. ?

When it comes right down to it, they simply don’t want to part ways with their clients as they don’t really believe that anyone else can service their clients as they can. They are passionate about what they do, they live for their clients, and have very often come a lifetime with their clients.

I’ve also seen situations where a potential successor from outside the practice is hired, only to leave the business a few years later. Was the wrong successor chosen, or was the adviser simply unable and unwilling to pass on clients and share the business?

Not many advisers retire – instead, they tend to hang onto their clients for as long as they can. However, no one knows what the future holds; an adviser may die suddenly, or become incapacitated. What happens then?

Advisers who don’t really want to let go don’t create space in their business for new talent. In the end, their clients, staff, business and they themselves all suffer.

Clients in particular need continuity – and not just continuity of a relationship. They need to know their agreed financial planning goals will continue to be pursued by whoever takes over the relationship, and that their financial plans will play out successfully. They also need continuity of service levels, such as how often their portfolios are reviewed. This, in turn, entails continuity of the practice advice platform.?

Providing continuity is about the total experience the client has with a practice. This can to a large extent be maintained if consistent values, principles and processes are embedded throughout the business. More often than not, clients understand that things happen and people move on in one way or another. They can live with that as long as the financial planning philosophy and processes and the level of service they have come to expect don’t change dramatically. They also fare better with a change in their key relationship if they know that your practice has properly planned and implemented a succession plan.?

Succession planning is not something you do the day an adviser dies, leaving the executor to try to put something in place. Unfortunately, this often happens, which is not in the best interests of clients or the practice as the business can become virtually worthless.??

To merely have a contract in place stating that your business will be sold to a nominated individual is at least a plan. But the challenge is that there are normally different business processes between the practices, no existing relationship between them and capacity constraints in the new practice. As the nominated adviser already has his or her own clients, there might not be time to effectively take new clients on.

The ideal solution would be to have a strong partnership amongst a group of advisers, and for clients to have relationships with more than one of them. There should also be a workable buy-in/sell-out process in place. ?Providing you are like-minded, a partnership can be a win-win for you, your clients, your partners, and your practice. ??