3. What’s Your Timing?
While most advisors associate transitions with planned exits, succession plans also serve to protect against an unexpected death or disability. Otherwise, your business could end up being sold for a fraction of its worth.
For planned exits, you will need to include a realistic sense of timing. Many advisors believe the process of successfully implementing their succession plan is one that can be accomplished in a few short weeks or months. But the process frequently is much more drawn out than that, oftentimes stretching out over a period of many years, which demands a sense of urgency for getting started today.
4. What Can You Do Today To Maximize Your Firm’s Value?
Determining what your practice is worth is as much an art as a science. While quantitative metrics—such as revenue and assets under management—are naturally part of any appraisal, other, harder-to-measure variables, should also be considered. Examples include whether your firm serves a highly sought-after niche market or the quality of your customer relationship management (CRM) systems. Advisors need to know what clients and technologies are helping them drive the most revenue.
5. How Will You Tell Clients?
There is no hard-and-fast rule for sharing your succession plans with clients. Many advisors choose to send a letter. Others prefer to communicate in a more intimate, face-to-face setting. Whatever approach you choose, it’s important to keep things at a high level, avoiding too many details while stressing that there is a plan in place to both help protect their interests and ensure their account’s continuity.
6. What Will Implementation Look Like?
During the implementation phase of a succession plan, problems can arise between the buyer and seller when expectations don’t match reality. For instance, it can become problematic when sellers choose not to attend meetings. Similarly, departing advisors may feel they are being sidelined too quickly. Detail what the first six months of the transition should look like in an addendum to the purchase agreement, clearly outlining the roles and responsibilities of both parties.
Succession planning can seem like a bewildering, never-ending task. But it is something that every independent advisor, if they haven’t already done so, needs to get started today. It’s the best way to protect your clients, secure a comfortable retirement and provide for your beneficiaries.
Melissa Mrazek is vice president of practice management at National Planning Holdings, Inc., the nation’s fourth largest network of independent broker-dealers.