My Plan B for retiring as an advisor

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Rarely does life or business play out as intended. Many advisors avoid planning for succession until upheaval occurs. Those who do plan in advance are often blindsided when their next generation bolts for greener pastures. Because we cannot predict the future, my approach to succession planning is very Buddhist — plan for what you want and don’t be attached to the outcome. How does this work?

A succession plan is not only for retirement — it is also needed in the event of premature death, serious illness, or incapacity. An advisor should have a plan for these events from day one of opening their business.

If you are a solo-practitioner, the plan may be something as simple as a list of other advisors you trust to take care of your clients. If your firm has multiple advisors, a buy-sell agreement and standardized processes to ease transition of client care may be enough.

From a personal standpoint, make sure you have enough disability and life insurance to provide for yourself and your family. This takes the onus off the need to get value from your practice if you experience an untoward event. Just like some doctors live an unhealthy lifestyle, there are financial planners who fail to have their own financial plan.

A good succession plan takes years to put in place.

Planning for the day you no longer want to work is the bigger challenge. A good succession plan takes years to put in place. You have to develop talent to replace you, let them fly with taking care of clients, reward them appropriately for their growth, and finally let go of control.

A lot can happen during those years and there are many reasons a succession plan can fall apart. Control of this process is an illusion. You may get to the point when you are supposed to leave and find out you aren’t ready to go. Your replacements may decide they want to move to another area of the country for family or the weather. Or after a number of years working with you, they may discover they don’t like how you run your business.

Selling your practice is also fraught with challenges. Most of us think our practice is more valuable than what other people want to pay for it. Market valuations rise and fall, finding a buyer who gels with your values may be tough, and the transition can take a lot of time to unfold.

The first step in a succession plan is making sure you develop the resiliency to pivot if plans don’t work out. Too many owners count on the value of their practice as their savings for retirement. This lack of liquid financial freedom can box you in a corner. Just like we tell our clients, it is crucial to save for the day we can no longer work or no longer want to work.

I have Plan A and Plan B for the day I give up my practice.

Plan A includes saving enough for my needs and basic wants so these are fully funded by the day my disability insurance runs out. This way, no matter what value I receive from my practice or when I have to quit, my husband and I will be okay.

Plan B provides for all the nice extras should I receive an actual return on my practice — with the additional funding, we’ll leave a legacy, give more to charity while we are alive, and upgrade our travels and experiences.

The most important step in a succession plan is making sure you have well-documented processes in place. Advisors keep too much institutional knowledge in their head. By developing a culture of standard processes, good documentation of the client’s story, and codifying how work is done, you provide a bridge to train the next potential successor if the first one doesn’t work out or if you make a premature exit from your practice. Also, well documented processes and organized workflow increase the attractiveness of your practice in a sale.

Happy employees are most likely to stick around. Is your workplace enjoyable, the work a fun challenge, and do your employees know their career path? What are you doing to foster their growth?

I travel a significant amount for speaking engagements and have a great team that supports this contribution to the profession. However, over the past couple of years, we’ve had some road bumps and interpersonal challenges, mostly caused by a failure in leadership — that would be me! A key team member was becoming unhappy. We have a healthy enough culture that he told me about his concerns early and he thankfully didn’t bolt for the door.

I’m a big believer in coaching and have utilized coaches for myself for most of the last 12 years. I pulled in a couple of coaches to help us and we are back on a good path. But the light bulb went off for me — my team would benefit greatly from individual work with a coach. Duh. For 2020, we set aside a very nice budget for them to work on their growth and the issues they want to address. I’m excited to see what happens.

I preach to clients and other advisors that the best financial plan includes finding work you love and doing it as long as possible. And the most important part is to make sure you thoroughly enjoy the rest of your time along the way so there are no regrets if you don’t live a long life. The people who are more likely to die peacefully are those with the fewest regrets. This is the way I live and I’m frankly at peace if I die today.

In the long term, my plan is to gradually cut back and with that, I will cut my pay and my responsibilities. I estimate that I’ll work at least another 20 years but who knows? That puts me in my 70’s and I’ll have plenty of savings.

My team is mostly equipped to take care of our clients and we have a buy-sell agreement in place. My current role is quality control, taking care of client life emergencies, and tax planning. They are smart and will hire someone to take those responsibilities if I’m out of action any time soon.

Just like I have Plans A and B for my personal life, I actually have Plan A and Plan B for the business.

Plan A is to sell the business to my team for a bargain price — remember, I’m saving for my future so any extra money is gravy. Plan B is if, for some reason, I don’t have a team who wants to continue the practice. I most likely will let the client base naturally downsize and refer remaining clients to advisors I trust. A sale wouldn’t be out of the question, but what I’ll have left at the end probably won’t be worth the effort.

Most of all, I have a healthy sense of detachment. I’ll do my best to make sure our clients are well cared for and the team finds fulfillment in their work so they’ll want to carry it on when I’m gone. If it doesn’t work out as I planned, I did my best and had a joyful life along the way.

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