I’m not a fan of regulation, but in this case it’s the best way to get the attention of busy principals. I haven’t yet met an owner of a firm who likes to think about his mortality (just like I’ve never met a client who likes reviewing his estate plan). But if you are going to be audited about your succession plan, you’ll do it.
I recognize that coming up with a solid succession plan can take a while. That’s why I’m proposing a few interim steps that will bring this issue to the forefront and move us toward a solution. Specifically, I propose:
1. Disclosure. Through regulation, every firm should be required to disclose its succession plan as part of its ADV. This will raise the bar without locking in advisors to any specific type of plan. No one is telling a firm what its plan has to be, but it will need to be prepared to discuss it with clients.
2. Research. How big is this problem? As I’ve mentioned, I think it’s huge. But we really need to find out. For starters, let’s find out about the plans from the 20% of advisors who say they have them. What’s in those plans? Are they real plans with real details, or are they just vague statements of intent? Some institution in our profession—an association, consultant or even a large vendor—needs to conduct the research.
3. Best practices. Building on the research, we can develop best practices. Our associations can lead the discussion. I’d like to see a succession checklist emerge that all forward-thinking firms can use to judge their progress on this crucial issue.
I realize that I’m introducing a difficult task at a busy time for advisors. We have a lot on our plates in caring for our clients and managing and growing our firms. But when we look clients in the eye and say that they can trust us to do the right thing for them, I think that ensuring the continuity of our services has to be near the top of the list.
Don’t let your clients’ lives be interrupted just because yours is. It’s the right thing to do for your clients and for your firm.
Ron Carson, CFP, ChFC, is founder and CEO of Carson Institutional Alliance, a professional network that helps advisors deliver trust, transparency and accountability through marketing and PR support, operational efficiency, compliance, wealth management and financial planning. In addition to these turnkey solutions, advisors can enhance their value proposition through added depth of one of the nation's best teams, which was ranked seventh in Barron's 2013 Top 100 Financial Advisors. For details, visit www.carsoninstitutional.com.