An advisory firm is the practice owner's baby, and that person may have spent his or her entire career building the business, but that inevitable day is fast approaching when thought must be given to a successor.

This is by no means an easy decision to make. It is emotional and fraught with unanswered questions such as whether a successor will treat clients the same way, employees like family and protect the reputation built over years.

Whether the firm plans to groom a successor from within or looking outside for the right partner, it is helpful to keep these five Cs in mind.

1. Culture: Over the years, firms develop an operating culture. Most likely, both clients and employees
can define that culture, and in most cases people take comfort in it. Often, it reflects the owner's personality and values. When considering successors, make sure that they will maintain the culture that has been developed. The firm's staff members should spend time with potential successors. They have a great sixth sense and can help check this box.

2. Core values: This is different from culture in many ways. The way that the firm manages assets should align with any candidates' approach. Do they take a financial planning or asset management approach? Are they community-minded and charitably inclined? Aligning the core values with any potential successor is extremely important.

3. Competence: The work that advisers do for clients ensures that they and their family members can live the lives that they envision. This means that a successor must be extremely competent in terms of approach, experience and skills. It is imperative that a successor have a stellar regulatory history and is above reproach.

4. Communication: It is important that a successor is a good communicator. The firm and its clients will undoubtedly undergo major changes as a successor steps in. One of the keys to having a successful transition is open and frequent communication. The successor must be clear and direct and compassionate when presenting the “new” firm.

5. Commitment: The successor must be fully committed to clients, employees and in continuing the good work, and in turn, the legacy that has been built. Although over time the firm will become more reflective of the successor, he or she must respect what has been built and the foundation upon which it was built.
Obviously, there are financial considerations in the decision process, but unless a firm gets these five things correct, the dollars and cents won’t matter.

Ed Friedman is the director of the eastern division at Dynasty Financial Partners in New York.

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

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Ed Friedman

Ed Friedman

Ed Friedman is director of strategic relationships at Dynasty Financial Partners. He leads the company's ongoing partnerships with its Dynasty Network advisers.