Succession planning is often thought about by independent advisors. But, it is rarely put into action. Therefore, this planning involves a lot of structure, along with time spent. And, advisors are busy growing their books and working on, not in their businesses. Business succession planning seems like a daunting process.
Let’s break it down for you fellas. Channeling our inner Young MC. Eighties rap, anyone? We digress.
Four focus areas when developing and implementing a succession planning process.
- Valuation Framework and Guidelines
- Every business, firm and practice is comprised of two components: structure and people. Therefore, evaluation of these two areas identifies the strengths and weaknesses of the practice. Besides, the sounder the practice’s balance sheet, the more likely they have systematic and repeatable the business processes. And, the more sophisticated and cohesive the team, the higher the ROI/ROA.
- Personal Assessment and Integration Into the Team
- Ask, “Does the client see me … or the team?” The answer should be, “The team.” Ease your succession partner into the roles and responsibilities of your team. Also, transferring your clients’ trust and loyalty to another financial advisor needs to be handled with care. Further, lay the land for your successor to lessen the flight risk for your key clients and team members.
- Client Assessment
- To start, identify the ideal client. This is based on demographics, minimum assets/revenue, percentage of recurring revenue, etc. Once these aspects are identified, map out the benefits. In conclusion, how closely do they align with your successor’s definition of an ideal client?
- Client and Team Communication
- Proper communication with your clients may have a significant impact on your succession success. Malansky + Partners completed a one-year study on the emotional response investors had to the language of transition. To properly do so, they found three steps that will maximize your success. First: Announcement. The retiring independent financial advisor is expanding the practice by bringing on a new team member. Second: Transition. The acquiring professional is taking on a larger role. And the last stage: Completion. The retiring professional announces their retirement, and the acquiring professional announces their new role.
In conclusion, we hope these four steps can help in your process and planning. And, may they guide you peacefully into your retirement journey.