Financial advisors spend their days helping clients plan for the future. You would think they would do the same for themselves. But when it comes to planning their firms’ future, many firm owners have not thought that far ahead.

“The most common succession plan for firm owners is not to have one at all,” says Mark Schoenbeck, managing director of Kestra Financial in Austin, Texas. “We see a lot of worst-case scenarios, where there is no plan and something bad happens or the owner is ready to retire without having thought it through.”

Firm owners have to take time to think about what their end game is, says Scott Slater, vice president, practice management and consulting for Fidelity Clearing & Custody Solutions. “They have to decide what they want for themselves and what it means for their clients and employees,” he notes.

Some succession plans can be created with a casual handshake agreement and yet work out well, while other deals somehow fall apart despite being carefully crafted.

“I had two firm owners who worked out an agreement sitting at a table and writing it on a sheet of paper and it worked,” Schoenbeck says. “It is amazing how nontraditional some of these agreements are.”

But he also had two firm owners who worked out a transition plan in detail and believed they had thought of everything. When it came time for both owners to exit, the wife of one decided she wanted a son to inherit the business. That case is still in litigation, Schoenbeck says.

Firm owners who have a book of business but outsource the infrastructure and technology can have another firm gradually take over their clients when the owners retire. For those who own the business structure itself, they will want to sell the business and not just a book of business when they retire.

In either case, the firm can be severely devalued if the advisor has not brought in new employees and younger clients over the years. Fidelity has looked at what it calls “sophisticated acquirers,” which are usually larger firms that are acquiring smaller ones as the owners exit.

Sophisticated acquirers want businesses that are still growing and have a mix of ages among clients and among employees. “If all of the clients are 70 or older, it is a less valuable business,” Slater says.

David Canter, executive vice president of practice management and consulting at Fidelity Clearing & Custody Solutions, said in a recent statement, “Acquirers [have] told us that they’re being much more selective as they consider which firms to target. They’re using mergers and acquisitions as means to pursue business goals such as talent acquisition, scale, improved advisor productivity and growth.

“This is a cautionary tale for firm owners, who may not yet consider themselves ‘sellers,’” he added. “There’s a tipping point where the valuation of their firms may decrease. If growth wanes, they stop investing in the business—specifically their talent, and if their client base is aging without being replenished with younger clients, firm owners may risk losing out on the value they’ve worked so hard to create.”

Advisors often wish their clients had come to them sooner to start planning for their financial future. Advisors should take their own advice and start planning their firms’ futures earlier, the consultants say. Don’t wait until a trigger event happens that pushes you to sell. You open up more options if you plan early, Schoenbeck says.