It is vital to have a succession plan in place if you are to ensure that your firm continues to operate successfully once you are no longer there. However, handing over the reigns can be somewhat of a nightmare for a lot of financial advisors. This is because they have not implemented their succession plan effectively, which stops a smooth transition from occurring. Keeping that in mind, below we are going to take a look at some of the best practices for financial advisors when putting together a succession plan.

Focus on continuing the success of your advisory firm
Too often, financial advisors become consumed with what is best for the buyer. However, succession planning is all about what is best for the client. Rather than merely considering your exit strategy, you need to zoom in on how the business is going to continue to supply an exceptional service. It does not matter whether the succession is strategic or not, or whether it is external or internal, you need to focus on what is going to be the best for your client base.

View succession planning as a never-ending process
A lot of financial advisors look at succession planning as something that only takes a few months. They simply put a plan together, and then leave it to the back of their minds. This is not succession planning. In fact, the process should be never-ending. You should constantly develop your plan, as well as those who you are considering as your successor. Even when you sell the firm, succession planning should continue.

Add value to your business now
Did you know that deals often stall because the seller and the buyer don’t agree on the value of the company? The typical valuation rules of thumb rarely apply in reality – i.e. one or two times the commission revenue, or two to three times the revenue fee. It is important for buyers to keep an open mind when it comes to this. Nevertheless, one effective approach is to concentrate on increasing the value of your firm now. You can increase the value of your business if you have plenty of internal partners who could potentially take over. For example, add more insurance plans, like trucking insurance, to your portfolio, or look to secure some high-value clients.

Be flexible in regards to succession type
It is no secret that most advisors prefer internal succession. This is because it allows for a more natural and smooth transition. However, it is important to remember that the decision does not need to binary. Some of the greatest succession strategies are both external and internal in nature. And, don’t be opposed to looking outside of the company; internal plans do have their hurdles, as they can be challenging in terms of dynamics and timing.

Start at the end
Last but not least, it is always a good idea to start with the end in mind. You need to focus on the talent your business has and the clients you service, as opposed to yourself. This takes time and is a lot easier said than done. But, if you simply focus on your business strategies, your intellectual property, and your client relationships, it’s going to be a hard sell.

What about the successor?

There are plenty of resources online providing advice for business owners putting a succession plan together, but what about the successor? If you have been identified as a possible candidate to take over the business, you should not simply wait around for it to happen. Below, we provide some top tips regarding the steps that successors need to make at a financial advisory firm prior to taking over.

• Clarify what is expected of you – First and foremost, you need to determine what is expected of you in terms of management skills, as well as the knowledge needed to fill the void left by the current owner. Will you be leading the company with other members of the financial advisory firm, or will the sole responsibility fall on your shoulders? You will also need to discover whether you are the only candidate in contention or whether others are being considered. You won’t be able to prepare efficiently if you are not aware of what is to be expected.
• Keep your rivals close – There is always intrigue whenever there is a transition at a business and, of course, there are going to be people that are jealous of your position. They will think that they are a better fit for the job and that you do not deserve it. These people may not be your friends, but you should keep them close, as they may have good ideas and valid points. You have to find a way to balance their ill intentions and aspirations so that you can keep them in the fold and profit from what they have to say.
• Establish your own ideas – New deserves new. While it is important to make sure you fill the void left by the owner, you should not merely try to be a copycat of him or her. You should come up with a few of your own ideas as well. Excellent successors need to establish their leadership and plan for the growth of the firm. New ideas tell employees that things are going to get better, and they help you to establish your authority. People don’t want to hear the same thing again.
• Get feedback – It is important to get feedback; this will only make you better. Often, people are only going to do what you say because of the position you are in. This does not mean they agree with it, and most will be unlikely to challenge it; after all, you are in charge. This is why it is wise to encourage feedback.
• Consider all of those impacted by the transition – You need to think about everyone that is going to be impacted by the transition and find a way to manage them properly. This includes everyone from clients to those who wanted the top spot and did not get it. There may be a number of potential customers and clients that surface because of you becoming the successor.