Cheryl Holland has embraced the idea of an internal competition to determine who will succeed her.

“You’re signaling your confidence in your internal team,” says Holland, a CFP who in 1998 founded Abacus Planning Group in Columbia, South Carolina.

Clients’ comments helped spur her to start thinking about what will happen to her firm when she moves away from leadership.

“Once you turn 55, people start wanting to know your plans. You better be able to tell them a pretty cogent answer,” Holland says.

Her answer lies with at least four advisers at her firm -- all younger than 40 -- whom Holland thinks could each likely replace her as Abacus Planning Group’s leader.

“We want internal candidates,” she says, emphasizing the plurality of that wish.

Although Holland hasn’t publicly identified those advisers as candidates to fill her role at Abacus Planning Group, internally, they know that potential opportunity exists for each of them.

To make sure that such a competition works effectively and doesn’t poison a workplace with rivalries, she strives to be transparent. Holland tells the advisers when they fail to demonstrate leadership skills and sketches out what they need to change to reverse that outcome.

“You have to be crystal clear what the rules are,” she says.

One of the biggest challenges she foresees is “making sure all the leading candidates stay,” Holland says.

Specifically, she wants to ensure that advisers who aim but don’t win the role to replace her want to remain at the firm despite their disappointment.

Holland stresses that in the long run opportunities may arise for more than one adviser to take on the leadership role. In other words, there will be room for the replacement’s replacement.

“No one wants this job forever,” Holland says.

But not all advisory firm leaders agree that internal competition will best determine who succeeds them at the helm.

“I think that’s a fairly destructive strategy,” says Peggy Eddy, who recently retired from Creative Capital Management, the San Diego-based advisory she founded with her husband decades earlier.

She placed her confidence in two advisers who she trained, and two of them replaced Eddy and her husband when they left the firm last month.

“Of the professionals on board here, it was clear that only two would be taking over the firm at some point,” Eddy says.

This story is part of a 30-30 series on smarter succession planning.

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Miriam Rozen

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas. Follow her on Twitter at @MiriamRozen.