Advisors excel at helping clients plan for the different stages of their lives. But when it comes to planning for stages of their own business lives-particularly the last one-many fail to take their own advice.

Many advisors think that when they feel ready to retire, they will create a plan for selling their practice or choosing a successor. Unfortunately, we often don't have that luxury in life.

In one sad case, a 58-year-old advisor in San Diego died suddenly while out on his daily morning jog. He had no known ailments, and he also had no instructions or plan in place in case something happened to him. His wife suffered from a chronic illness and could not handle making the decisions despite their attorneys and other professionals standing by ready to help. He had multiple businesses, and it took months for things to get organized. By that time, most of the clients were gone.

A client base and the assets and revenue it represents are likely to shrink if a planner can't work. But this outcome wasn't inevitable: If he had chosen a successor in advance, he could have avoided the strain on his ailing spouse and saved many clients.

Another advisor looked ahead and began planning as soon as she learned she had cancer at 56. She dedicated time to discussing "good fit" criteria between potential successors and clients, including her husband and a key assistant as well as her branch manager, broker-dealer and FP Transitions. Her successor was younger but had the same high-touch client relationship style and investment philosophy. She and the successor held an event for clients that was rewarding for everyone, and the business retained all of her clients.

As advisors know, and these examples show, planning ahead makes all the difference. Yet a study presented at the Financial Services Institute conference in 2009 found that more than a quarter of independent advisors did not have a succession plan. Just like clients who put off buying life or disability insurance, or writing an estate plan, advisors avoid planning for tragedy and the next stage. As planners, we need to ask, "Am I going to leave the end result of all my dreams, hardships and hard work-as well as the future well-being of my family-to chance?"

Once dedicated to choosing a successor, the three greatest challenges advisors face are fulfilling all the due diligence steps to select a good fit, working around pitfalls in the deal and not cutting corners on logistics.

GET THE RIGHT FIT

The most likely choices for a successor are family heirs or long-time employees, but often these usual suspects are not the best fit for the business the advisor has built. Potential successors must be put through rigorous due diligence to make sure their strengths, goals and personality match the business and the majority of the clients.

What happens when an advisor fails to do the necessary due diligence? A 63-year-old advisor in California retired and sold his book of high-net-worth clients to another advisor who offered the highest bid. The deal included a down payment and an earn-out or revenue-sharing arrangement, while the focus of the deal was getting the highest possible dollar amount, including any gains in revenue over the ensuing few years. Since the retiring advisor stayed licensed during the earn-out period, this should have been a win-win situation.

However, the seller overlooked a key piece of due diligence: the fact that the services and products he normally sold were quite different from those the successor favored. The buyer was focused on the client relationship and selected very conservative investment options.

After the sale, the revenue stream dramatically changed from large upfront commissions to asset management fees. The seller was receiving substantially less than he expected, and threatened a lawsuit. The tense working relationship diverted a lot of the successor's time, although nearly all of the clients appreciated the successor and stayed with her.

On the other hand, here's a good example of proper due diligence: An advisor considering buying a practice saw in advance that half of its assets came from three clients. In his offer, he put the burden on the retiring advisor to cement the relationship with these clients and accept a final lower price if they left. The offer included a potential higher-end price, but a lower down payment and price adjustment clause after two years. In the end, the deal didn't work out, but the potential buyer came away feeling that he made the right decision.