The Complete Guide to Succession Planning for Financial Advisors

As financial advisors, we focus much of our energy on helping our clients prepare for their financial future. We create strategies to build wealth, plan for retirement, and protect against the unexpected so our clients can have a fruitful future. Yet, many Advisors often fail to prepare for their own retirement and departure from their business. As their business is often their largest financial asset, not preparing to exit well means they are risking their own family’s financial security and future.

A study we conducted in partnership with Environics Research found that almost 90% of financial advisors we surveyed lacked a formalized succession plan.* 

For most independent advisors, putting a sound succession strategy in place can be very challenging. Whether it’s defining exit strategy goals, identifying the right successor or purchaser, or knowing how to fully value the worth of their business – each element requires careful thought and preparation to ensure success for everyone involved. 

A comprehensive succession plan must include a strategy to ensure your business can continue to function in the event of a disruption or the untimely death of its principal. A business with well documented processes, repeatable client engagement systems, streamlined portfolio offerings, and good compliance ratings helps ensure your business can be easily and confidently valued. The more prepared you are to succeed your business, the more you remove risk of loss from your personal and business balance sheet. 

The Complete Guide to Succession Planning for Financial Advisors provides a template for you to map a successful exit from the financial advice business. 

What is Succession Planning?

Succession planning is the process of effectively passing leadership of your financial planning practice to a new owner and realizing the maximum equity value from your business.

A complete plan covers the entire process, from goal setting to identifying a successor and planning for unexpected interruptions. It will include:

• Goal setting and time horizons
• Continuity and exit plans
• Choosing and training the right successor
• Establishing the value of your business
• Communication & implementation strategy

Why is Succession Planning Important?

The financial advice business is a highly personal business. Your clients and your business rely on you.

As you approach retirement age, you might want to slow down, spending less time the office and a little more on the golf course. However, the reality is that even if you were able to slow down, the demands of your business and clients may not.

Without a plan to manage the day-to-day, your client service will suffer.

Without the right people in place to deliver a high-level of service, clients will leave.

Without actively managing and growing your business, churn will eat up the value of your book. 

Clients will continue to require advice and guidance at every life stage. As clients age and their priorities evolve, they will continue to look to you, and your successor, for that advice.

If executed well, your succession plan will provide enough time to introduce clients to your successor and transition relationships gradually. How you manage this transition phase will help ensure your successor can continue to fulfil your clients' needs, provide advice, and deliver the high calibre of service they expect. This will also protect the value of your business now and in the future. Think of it as a roadmap to putting the right people in the right place, at the right time.

Your succession plan is the roadmap to putting the right people in place at the right time, so that when you're ready, you will get the most value from your financial advice business.