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Succession Planning As Growth Strategy

Terry Mullen
Jul 16, 2018
Whoever thought succession planning, or the lack thereof, could become the central theme of a hot new television series? Evidently, HBO did, with its recent premier of Succession, a drama about how things can go horribly wrong without an effective plan.

Or, as HBO puts it, “The Roy family controls a global media and entertainment empire, but when patriarch Logan Roy announces he’s stepping down as head of the company, the family is forced to contemplate their next moves.” It sounds ominous, but would be completely avoidable with a sound plan.

Hopefully, the succession of your financial advisory practice will be less theatrical, but it won't be unless you start planning now. So, what’s holding you back?

No Sense Of Urgency

You’re doing well, your business isn’t in trouble, and there aren’t any waves on the horizon to force doing a plan. You’re generally content with getting steeped in day-to-day activity and choosing not to focus on it. Sound familiar?

Even though putting off succession planning increases the risk that the business will be diminished, if not hurt outright in terms of value and the ability to retain long-term clients, it’s startling that fewer than 25% of financial advisors have such plans and most of those plans aren’t very good.

Many advisors actually think they have a succession plan for their practice, but it may simply be a buy-sell agreement with another practice or an informal arrangement with another advisor to take over their business if they die. But it’s not a true succession plan that has been thought through and executed.

It Isn’t A Light Switch

How long will it take? It could take from 5 to 10 years to identify the right internal or external buyer, properly monetize the business, decide how to transition your clients and team, and align all of them through joint accountability according to a detailed plan customized to your vision. It takes time and conscious effort to make sure the various pieces fall into place the way they are supposed to and it all works in the end.

And being able to discuss succession with clients gives them the long-term assurance they need to keep working with you, giving you more of their assets to manage, getting their family members to work with you, and referring others to you because they know the services you provide will outlive your departure from the business.

Plan To Grow

Indeed, you can safely bet that your clients are wondering about your succession plan even if you’re not. Their view of the future is very much wrapped up in thinking about what happens to their investments and the long-term financial security of their families if you’re not around.

Knowing this means you have to be proactive about addressing their understandable concerns, instead of leaving it to their guesswork. The more clarity you share with your clients, the more you will give them the powerful relief they need.

Succession planning will not only help you ultimately transition your business, but will actually enhance your ability to grow the business by having a plan in place. In fact, succession planning can be a growth strategy. Consider that otherwise, without a plan, all you might have to sell when the time comes is a client list or a prospect list — not exactly what you’ve anticipated or worked for all these years.

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