Have you ever had a client ask what would happen to them if something happened to you? Or when you might retire? Whether it is just around the corner or far into the future, the new year is the perfect time to plan for your succession, your retirement, your legacy and the next phase of your practice.
While a good succession plan can help make your practice more valuable tomorrow, it can also help to make it a better business today. There is no time like the present to increase the value of your business. Succession planning examines your practice as an effective business, your business readiness to retire and sell, and your personal readiness to transition.
Many factors come into play. The nature of the practice, culture, value/promise, the team and staff, timelines, marketing, revenue sources, recurring income, client base, assets, distribution model, market valuation, and compensation arrangement for the sale all play a part in determining the success of your plan.
“Who will take over?” is the biggest question and gender plays an important role.
Women, unfortunately, are less visible in the field of practitioners. The percentage of female CFPs is flat at 23%, and there are four times as many men. It’s time the list of potential successors includes women.
Many times, I’ve observed that when the acquiring advisor is female, whether the relinquishing advisor is or not, it has equated to a good business decision. From a “follow the money” perspective, women control tremendous wealth. Women control more than $10 trillion (about 33%) of total U.S. household financial assets, and by 2030, it will rise to $30 trillion. Nearly 90% of women either assume control of finances or share it.
Women advisors have proven they can be the preferred choice for any client. They bring a client-centered ability to understand how clients feel about where they are now and how to reach their future goals. Taking a long-term approach to the client-planner relationship, asking a lot of questions, and listening well are qualities paramount to creating the right plan.
Client retention is also key to a successful transition, as the practice must support the payment structure. Research has shown that up to 70% of widows leave their advisors within the first year of death. In 2020, a New York Life Investments study showed that women felt misunderstood and underserved by financial advisors. Empathy topped the list of traits women desired, as well as an advisor aligned with their interests who educates and responsively communicates. A female successor can be a natural solution to client retention of heirs.
Darci Kelley, LPL advisor and principal of Kelley Family Financial in Tustin, California, has a four-woman team that is multi-generational. “Regardless of gender, our clients share that they like having female advisors. They appreciate that we are empathetic and have a longevity plan for the practice. Clients interact with our entire team, which enables them to know firsthand the client experience for themselves and their families over time.”
Don’t wait until next year to set your succession planning in motion.
Dr. Daralee Barbera is the director of the MSM Program at The American College of Financial Services, the George G. Joseph and Richard A. Liddy Chair in Practice Management and Leadership, and Assistant Professor of Leadership.