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Keys to Identifying and Selecting a Continuity Partner

Carla McCabe
Apr 15, 2020

Firms with only one owner and no internal succession strategy are well aware of the importance of having a continuity partner who can step in and manage the business upon the occurrence of an unforeseen event (i.e., death or disability). But what happens if you haven't identified this firm or individual? You can't put the formal documentation into place until you've found someone to serve in this capacity.

We joke that the process of finding a partner, whether for continuity or succession (i.e., a sale to facilitate retirement), is often like dating and marriage - you probably don't want to marry the first person you date! Since the future of your firm potentially lies in the hands of the person (or people) you choose to replace you, it's critical that you identify the correct partner.

Prioritize Attributes You Want in an Emergency Partner

To begin narrowing the pool, start thinking about the attributes your ideal partner will have. Factors such as size, location, and culture all play an important role in finding the best partner.

  • Size - Capacity will become an important issue when you consider who will be best equipped to manage or take over your business. AUM can be an indicator not only of whether someone will be able to manage the onslaught of new clients, but can also shed some insight on any technology that's being utilized to assist with firm efficiency.
  • Location - Long distance relationships rarely work out; the same goes for continuity partners. A partner that is located on the other side of the country isn't likely to be able to step up at a moment's notice, especially when your business needs it most. Instead, think about how close an ideal partner should be located to your physical address (maybe it's within a 50 mile radius). Or perhaps you have a large concentration of clients in a state far from your office - that geographic area might be a suitable area to search for a partner.
  • Philosophy - You'll obviously want to find a partner who does business similarly to the way you do. Take a moment to define your culture so you can easily vet potential partners. Consider investment style, management style, communication style, and the type of personality (i.e., type A) that you'd want in a partner.
  • Owner Age - Ideally, your continuity partner should have more years left in the industry than you do. It rarely makes sense to choose a partner who is close to retirement, as you'll likely need to find another new partner again in a few short years.

Finding and Identifying Potential Emergency Partners

Now that you have a general idea of what you're looking for, start looking for candidates. This can admittedly be the most difficult step in finding a partner, as most people don't even know where to begin looking! Think outside the box and you'll realize there are more avenues than expected.

  • BD/Custodian - Your broker dealer or custodian can usually help match you with folks in your local geographic area. Don't be shy about asking for help in connecting with nearby advisors. You get the added bonus of meeting advisors that already use the same platform as you.
  • Wholesalers - Wholesalers are a very under-utilized resource when it comes to meeting other advisors. Open up to one or two that you know and share your plans and what you're looking for. Coincidentally, there are many wholesalers out there who might be looking for an opportunity to transition to your side of the business! Be open to the possibility that your eventual partner or successor might be a new hire to your team. 
  • Network - Take advantage of networking sites like LinkedIn to connect with potential partners. Attend conferences and make sure to socialize and speak with people you don't know. Local community/civic groups and peer groups are other great ways to connect. Share as much as you're comfortable with and understand that times have changed - advisors today view each other more as peers they can learn from rather than competitors.

Connect with Continuity Candidates

Your continuity partner should be someone you know and are comfortable with. Approach this process like you would dating/marriage (there's that analogy again!). Make sure you take the time to get to know and "date" your potential partner before rushing to the altar (i.e., don't rush to immediately put an agreement in place). Visit their office, meet with other staff (and even spouses), and learn what makes them tick. Perform thorough due diligence to ensure you're making the best choice in a partner.

Formalize your Continuity Plan

As you move closer to selecting a continuity partner, the next step is to develop the terms and conditions for the relationship. This is surprisingly where most advisors fall short - they've identified and selected a partner but have overlooked the most critical step... actually putting the agreement in writing. Be sure to work with a professional to learn about the available options and other items you should consider and incorporate into your continuity plan. (see more: 3 Keys to Creating an Effective Practice Continuity Agreement article)

We have even more good news - TrueMatch is COMING SOON to better assist you in finding a partner!

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