Slideshow 6 Succession Planning Tips Every Financial Advisor Needs to Know

Published
  • July 26 2011, 12:00am EDT
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1. Be clear about your own retirement goals.

1. Be clear about your own retirement goals.


How you’ll receive your payout -- either a lump sum or ongoing revenue stream, for example -- is important. But being mentally ready to step aside may be an even bigger issue. So many advisors are focused on the nature of the transition deal that they fail to grapple with how much they’ll miss the business. “Have a concrete plan for what you’re going to do with your life once you’ve transitioned out,” Slater said.


2. Nail down your talent.

2. Nail down your talent.


As you decide which employees are most valuable to the business, begin to tie them to the firm. One way is to offer a minority stake in the business well before you’re ready to step down. “Founders are often concerned with losing control of their organization,” Slater said. “But transitioning a smaller portion and linking the individuals to the future success of the firm is a very important step.”

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3. Identify and develop internal talent.

3. Identify and develop internal talent.


If you’re interested in internal succession -- and many advisors are -- Slater advises to start identifying candidates among your team who might be able to lead the business one day. Figure out the criteria for evaluating them and decide the skill sets you’ll need to help them develop.


4. Seek outside advice.

4. Seek outside advice.


Many advisors have strong personalities, clear visions and a lot of drive. They want to continue running their businesses as long as possible. But that emotional commitment to the business may create a blind spot. What’s really best for you, your family, your firm and your clients? A trusted outside advisor can give you valuable feedback.


5. Create a vision.

5. Create a vision.


If you have a vision for how you’ll exit the business, you have a better chance of controlling your destiny. So set some strategic objectives. Is your goal to maximize the return on the investment you’ve made? Do you want to create a multi-generational firm? A well-thought-out plan can protect you from making an emotional decision when, say, a bigger firm offers to buy you out.

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6. Leave enough time.

6. Leave enough time.


Most heads of planning firms initially hope to transition their businesses to their employees. But they frequently don’t allow themselves enough time to effectively make that transfer. Slater recommends leaving at least a five-year window. And there’s nothing wrong with starting much earlier. As counterintuitive as it sounds, those whose businesses are in the early growth stages should start to envision at least the broad outlines of their exit strategy.


6 Succession Planning Tips Every Financial Advisor Needs to Know

6 Succession Planning Tips Every Financial Advisor Needs to Know


Financial planners become successful through a fierce commitment to building their practices. But too few principals proactively plan for when -- and how -- they will one day move on. In failing to do so, they run the risk of leaving their firms on someone else’s terms, said Scott Slater, managing director, business consulting for Schwab Advisor Services. “And that’s somewhat ironic,” he said, “because they are planners.”

To avoid being unprepared when the time comes, here are some of the key steps in the succession planning process.