If you’re a financial advisor, you know your clients’ plans for retirement must begin well before they actually stop working. That may hold even more true for your own retirement. Indeed, if you’re 50 years old and own your own firm, it’s not too early to start planning for succession.

“When I hit 50, I realized that from a client’s perspective you’re going to become less and less attractive, because they’re going to look at you and wonder what’s the plan for the future,” says Timothy Watters, 59, founder and principal of Watters Financial Services in Paramus, N.J. “They’re going to ask you about succession for you.”

Jessica Karner, an attorney at Keegin Harrison LLP in San Rafael, Calif., who counsels clients on succession planning and handles sales of investment advisory firms, says advisors must allow at least five years to prepare for the transition out of their firms. The most common ways owners divest is through internal successions (by grooming junior partners who gradually take over the business) or by selling their firms (and clients) to a larger entity. Either way, the process takes “years, not months.”

If the succession is done internally, it could take a few years just to find the right people to take over, and more years to comfortably shift clients to them. And if your business is worth something, your succession candidates may need time before they can afford to buy you out.

If, on the other hand, you’re a “lone wolf” and planning to sell your firm to a larger company, there’s often a transition period in which you will become an employee of the acquirer for a few years, helping the buyer hang on to clients and getting those clients moved over to the new firm. This effort can be challenging if you’re used to being your own boss.

Karner helped Lynn Ballou merge her firm into EP Wealth Advisors in Lafayette, Calif., two years ago. Ballou founded Ballou Financial Group in 1986, and it was later merged into Ballou Plum Wealth Advisors in 1998.

Ballou, who is 65, said she started looking for a succession solution when she was in her late 50s and her former partner, Marilyn Plum, was in her early 60s. Ballou says, “We knew [Plum’s] retirement was coming up and that we needed to look for the right solution sooner rather than later. We determined that we had three stakeholders in this journey: our clients, our team and the founding partners. We came to realize that to really protect the experience for clients and team members, we needed a larger company solution. All our staff stayed with us. And for EP, they acquired a committed team of professionals who had a long, deep connection with their clients and community. So it was a win-win for both buyer and seller.”

Watters is transitioning ownership of his firm to his son, Colin, 29, who received some of his financial training by working at a stock brokerage company and is a certified financial planner himself.

“I thought about merging with another firm, but didn’t want to do that; I wanted to do something internally,” says Watters, who began the process five years ago. “We’ve been making sure that Colin is involved in a lot of the client meetings. That’s important. The clients have to accept that person. It takes a while before they see that person as someone they can really trust. They now see him as a professional, as someone with enough gravitas to be here.”

First « 1 2 3 » Next