Advisor Succession Planning

Aug 25, 2020 Share This 


Plan_for_FutureYou’ve built a career on helping clients prepare for their retirement, but have you thought about how you’ll handle yours?

Many advisors view creating a formal succession plan as a “someday” task. This is especially true for the majority of solo financial advisors who have no plan in place. Since they make up 70% of the industry, it may be cause for concern.1 Slightly larger practices may be in better shape, but even established firms need to consider how their clients will be cared for when their advisors decide to retire.

That’s not to suggest advisors underestimate the importance of having a succession plan. Rather, there may be significant personal and professional considerations that contribute to their reasons for holding off.

You’re Only Human

Succession planning may be viewed as the first step toward leaving your chosen profession. The transition can be emotionally charged since advisors may:

  • Derive daily satisfaction from their work, and retirement might threaten that sense of well-being
  • Care about their clients, and severing sometimes years-long relationships may be paired with feelings of loss and upset
  • Define themselves by their occupation, and the thought of retirement may cause anxiety over a loss of self-identity
  • Find it difficult to trust a successor will provide the level and quality of service clients have come to expect

It’s okay to acknowledge your humanness and the feelings that succession planning can evoke. Where it can become problematic, however, is if your feelings keep you from doing what may be best for your clients — developing and implementing a succession plan to help ensure they’re cared for in your absence.

Advisor Succession Plan Tips

You may need time to reconcile your emotions and the inevitability of stepping away from your business. A well-structured succession plan may give you just that, as the entire process may take several years. As such, advisors at any stage in their professional journey need to familiarize themselves with the expectations and steps involved in establishing a succession plan that serves clients’ need for continuity, and provides personal peace of mind as retirement nears:

  • Clarify what you want. Determine which type of exit strategy is best for you. For some, that may mean working part-time for a few years to ease out of the business. Others may opt to choose a specific date in the future and work toward a full wind-down.
  • Select a successor who embodies your business philosophy. Seek successor candidates who demonstrate advising styles and demeanors similar to your own. In a firm you may have access to junior advisors who are ready to take on full responsibility, or you may have a lead on an independent junior advisor who may fit the bill. Give yourself plenty of time to find the right person, verify the fit, and ensure all the various transitions are handled with confidence.
  • Strategically segment your book. You likely have your clients grouped by needs, potential and profitability — or other similar buckets — so the question becomes how to transition the groups to your successor so long-term success is realized for your clients and your firm. Don’t let this be a one-sided transition. Involve your successor so they have time to develop a rapport with clients, better understand their needs and gain client trust.
  • Formalize a contract. There will likely be plenty of discussion and maybe some informal arrangements around how the succession will be handled. To make sure there’s no miscommunication or misunderstanding, put everything in writing. A written agreement that’s drafted with some degree of flexibility to accommodate unforeseen changes may serve as a blueprint for your succession plan. Every broker/dealer or employer will handle these types of contracts differently, so be sure to discuss your succession plan agreement with your employer when appropriate.
  • Notify your clients. The last thing you want to do is have your retirement catch your clients off guard. While some may have met your successor through meet-and-greets or other interactions, that’s not a substitute for executing an official communication strategy. How to reach clients may vary — letters, emails, phone calls, video chat — but the important point to remember is to make sure everyone is aware of your plans, and of the confidence you have in your successor. You may also choose to issue occasional updates to your clients as the succession plan unfolds, and you might ultimately send a farewell letter or email, or even record a video of you and your successor together as you “pass the baton” and close the loop with a personal touch.

Succession planning may be bittersweet, but it’s necessary in order to take care of yourself during the transition and to ensure your clients are cared for at every touchpoint.

Reinforce your commitment to your clients’ success with the practical advice you’ll find in the Step by Step Guide to Helping Your Clients Achieve Financial Security and Satisfaction in Retirement. Click the button below to access your copy of this valuable guide now.

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SOURCE:, As advisors start to ‘age out,’ firms look to step up succession planning, October 19, 2019


Topics: Estate Planning