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Succession Planning For Financial Advisors David Grau – 1) Securing the future of your practice ” ” We heard loud and clear from consultants: ‘We need help. We know what to do for our clients, but we don’t know what to do for our own retirement plan.” — Sheila Kafri-Agassi, Vice President of Partner Development, United Planners An Effective Succession Planning Strategy I However, beginning advisors are often sidetracked by the common challenges that arise during the process. For example, it may be difficult to find a similar and reliable successor. Also, the process of evaluating a practice and creating a legally binding document can be difficult and expensive. In response, United Planners has taken lessons learned over the years by helping advisors develop their own transition strategies to follow these guidelines for a successful succession planning process. “We heard loud and clear from advisors, ‘We need help. We know what to do for our clients, but we don’t know what to do for our own retirement planning,'” Sheila Kafri-Agassi, United Planners says Vice President of Partner Development at If you’re like most consultants, you do. You have a great job plan for your clients, but you haven’t given it much thought. What happens to your practice when you retire or if you don’t return to the office. Lunch a day. You’re not alone: 93% of advisors don’t have a legally binding contract for their successor. Some advisors are so busy growing their practices that they haven’t made time for emergencies or planned departures to focus on strategy. Others like working with clients and never want to.For your clients, your family, and yourself, you shouldn’t delay these preparations: The average advisor is 55 years old, and a formal, written succession plan work as an advisor. It is necessary to do To preserve the value of one’s practice. “The reason to start early and be proactive in the succession planning process is that it’s right for clients, and it’s right for advisors and their families,” says Dave Shindle, president of United Planners. “The longer the transition period between you and your successor, the greater the trust factor with clients and family.” Choosing a Transition Strategy The first step is to determine your preferred exit strategy to define a succession plan that leads you to that goal. Even if you never want to retire, you should consider that age and infirmities may make it difficult to advise clients at some point. 1
2) “” All advisors need, at a minimum, a succession plan that establishes a short-term, licensed, qualified successor to manage your client in the event of sudden death or disability. FINRA Rule IM-2420-2 expressly states that compensation payments owed to widows or other beneficiaries to a registered representative shall not be considered a violation of association rules if a fiduciary agreement requires such payments. “As I get older, I can imagine that I will have the same energy level as I did as a child, but I have to anticipate the worst-case scenario, when I have a disability, dementia. , or may just lose interest,” says Dennis. Lohr, founder of APD Financial, who recently developed a follow-up and succession plan for his RIA in California. “You never know what’s going to happen.” (For more on Lohr’s succession planning story, see the APD Financial case study on page 5.) At a minimum, all advisors need a continuity plan that includes a licensed, qualified, short-term manager to manage your clients. Establishes the succession of time. In the event of your sudden death or disability. But to identify your goals for long-term succession planning, CuffariAgasi recommends asking a variety of questions about the future, such as: Someone familiar with the consulting industry. For example, United Planners offers succession planning coaches to participants in its Legacy, Exit and Acquisition Planning Strategies (LEAPS) program. (For more information about the LEAPS program, see the sidebar on page 5). These coaches can review practice details and the advisor’s transition goals to suggest additional options and discuss how market conditions may affect those plans. Finding the Right Successor Choosing a successor is often the hardest part of the process. Reason: Consultants want to match clients with someone who shares similar values, standards and planning approach. You’ve worked your whole life to achieve success, and you certainly don’t want to shake hands with someone who doesn’t value your efforts, processes, customers, or success. You may not choose a potential successor for short-term succession planning. One of the most important elements is finding an advisor who is properly licensed and experienced in helping your clients manage transitions after death or disability, and who has the resources to honor payment agreements while retaining your clients. And so is morality. There are several ways to identify a good candidate for your long-term succession plan. Finding a potential heir in the house is a good first step. A partner, junior consultant or family member with industry experience may be appropriate. If you don’t have a successor at home, ask yourself if you’re ready (or have the time) to find a youth mentor to train. Mentoring a younger advisor can be one of the most successful transition strategies for advisors whose exit date is at least five years away. Not only can you teach a consultant your planning approach, but you can give your clients time to become comfortable with their succession. Bringing in small consultants to expand your practice, new clients, small or pro- • What happens to your family’s income if you become disabled or die suddenly? • Do you ever find yourself spending less time in the office – or not at all? • Have you promised your family about retirement or reduced workload? • Is it possible to assign some clients to another consultant so you can focus on some of your most important relationships? • If you want to retire, what is the time frame for you to leave the business? The answers to these questions will help you identify opportunities for change. For example, you may choose partial succession to continue working with clients while delegating most of the management duties to a successor. Or, you can create a full-scale transition plan to hand over all aspects of the practice to the successor. Alternatively, you can choose to create a continuity plan that provides income for your family during what is likely to be the greatest period of their lives. It may help to discuss your options 2
Succession Planning For Financial Advisors David Grau
3) “The goal of the evaluation process is not only to know the value of practice; The goal is to do something about value. – David Grau Jr., president and CEO of Succession Resources Group, is looking at an element of technology that can help preserve client assets that are passed down from parents to younger generations. If you’re looking to sell your practice to an experienced successor, start by listing the key qualities you want that person to have in terms of experience, education, licenses and designations, and the types of services they offer. be in the form of Find potential successors within your professional networks who meet these criteria, or market your business to qualified/subsequent candidates, your broker-dealers, third party money managers, custodians, business brokers/recruiters. Who can market your business and market your business. or working with M&A counsel. According to your criteria. Shortlist candidates and determine if they match your personality, values and approach to customer service. For example, if you take an educational approach with clients, you want a successor who does the same. Plan a series of meetings to get to know each other, and discuss hypothetical planning challenges or specific client situations to learn how a potential successor would address those issues. Also, consider bringing several clients together to discuss communication styles and planning approaches. Using a system like the KOLBE or Strengths Finder test can help identify whether you’ll be a good long-term match. An alternative to doing the research yourself is to work with the legacy research solutions of the LEAPS program. Participants receive a personalized marketing letter describing their practice and succession opportunities, which United Planners (UP) can send to up to 1,200 consultants within a 15- to 50-mile radius of your practice. UP Succession Planning Coaches can then pre-qualify leaders to narrow down the list of potential successors to these responses. “Sending 1,200 letters to a field creates a lot of candidates with different experience levels and timelines,” said Scott O’Keefe, UP’s succession planning coach. “The answer helps you find succession options you’ve never thought of before.” Signing up for a Succession Search Network can also help young advisors grow or expand their practice. “There are many consultants who want to grow through acquisition,
Financial Advisors Need Succession Plan To Benefit Clients And Firm
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