It’s rare for advisors to have a written succession plan, which is strange because advisors who work with business owners generally take a hand with helping those clients put their plans in place.

I have a few theories about why it seems harder for advisors to develop their own succession plans.

First, the idea of passing clients to anyone else is a high hurdle. Throughout our careers as advisors or planners, we’re encouraged to develop our businesses, build our businesses, work with our clients and develop strong relationships with those clients. As a result, we don’t want to lose these relationships.

Secondly, many advisors fail to notice that, like many of their clients, they’re getting older. A lot of advisors push the idea of retirement into some nebulous future when their recurring revenues are substantial. Further, while sitting across from clients talking about preparing for retirement, advisors seem to miss or forget that they too should prepare for their own retirements, as well as other just-in-case scenarios such as disability or premature death. While it’s true some advisors actually plan on never retiring, I know two advisors with more than five years in the business who suffered a long-term disability before the age of 50 (one had disability insurance, the other did not).

And finally, many advisors feel if they bring up the idea of succession planning, it might be assumed they’re considering leaving soon or are somehow not serious about building their businesses.

A compounding factor is that advisors don’t normally seek outside advice from their accountants or business consultants. They often do the financial planning for their own personal situations. But, like most do-it-yourselfers, they find it difficult to be objective enough to ensure their families have adequate insurance and that they have enough disability coverage. Advisors often fail to solicit the opinions of people who can prevent them from overlooking the obvious.

Get a plan

Instead of creating a written business plan, many advisors focus on their marketing plans. But a business plan is critical because it takes a broader look at an operation than does the marketing plan. Sure, the business plan includes the marketing and sales goals for the next year, but it also looks at the overall direction for the business, industry influences on that business, the goals of the business owners, tax structure and the succession plan.

To create a viable business plan, start by asking yourself the same questions you know are tough for your business-owner clients to answer. If you write a good business plan, you are more likely to achieve most of your realistic goals if there is accountability to follow through on the plan.

Further, as the senior executive of your business, you have the responsibility to ensure you have a viable succession plan in place so the clients’ financial affairs continue to be managed when something happens to you; or you retire. At a bare minimum, some advisors put a counter-reciprocal agreement in place with another advisor at their firm to safeguard their clients, but this does not always maximize its value.

Sooner or later your clients will start to ask direct, or not so direct, questions regarding your future plans.

Your ability to answer these questions honestly will help reassure your clients. It will also protect the value of your business should you become disabled or die before you’re ready to leave. At some firms, if something happens to an advisor and there is no succession plan in place, the firm may make a payout based on retention, but only after the clients have been spread among a number of other advisors within the office or branch.

When this happens, it’s often done without any concern for matching clients with an advisor who would best suit their personality or financial needs, and so would not maximize client retention and subsequently the value of the business for your estate.

At one branch, when an advisor left suddenly, the clients left behind were distributed only to the top-producing advisors; at another, the clients were distributed to the advisors who were following the current investing approach.

Neither approach is necessarily in the clients’ best interests. So, if it’s truly important to start with the end in mind, then the head of every advisor practice or firm must be prepared for the day when he or she is no longer part of the day-to-day operations.

This includes preparing subordinates to take over larger portions of the accounts or finding a successor, ensuring clients are comfortable working with anyone on your team, putting in place a plan to maximize client retention (and value for the business), ensuring valuations are properly performed so that equity can be transferred, and documenting the succession plan in detail.

The future of your business and your own future depend on it.

Leaving on Your Own Terms – 2010 and later

You had put your team in place—a highly qualified licensed assistant you were grooming to take over your practice when the time came and an assistant you felt you could not live without. That was September 2008, and it seems like a long time ago.

So much has happened since then, perhaps this is an understatement, and in many cases you’ve probably noticed that some clients have only wanted to talk to their primary advisor: you.

It wasn’t just you who was overworked during the downturn. To help protect the value of your business, take a look at your assistant. Has compensation been commensurate with the work that needs to be done? Is the workload reasonable? The assistant often plays a key role in the transition process and minimizing the change for clients – and that serves to maximize client retention.

And what about your licensed associate and future successor?

While your clients were reaching for your reassurance and advice, they may have bypassed your licensed advisor, leaving him or her wondering about their role. Situations like this call for a bit of damage control, so you need to find out if he or she is still committed to working with you and being your successor. Review the terms of the associate’s agreement and find out if he or she is still even committed to the business.

This is not an area where you can afford to make assumptions. Discuss this with any future or potential partner and make decisions accordingly. You also need to re-educate your clients that your licensed assistant is fully qualified (if indeed that’s the case) and take steps to ensure the associate has consistent contact with clients, according to your business plan.

To help foster the client relationships with your licensed assistant:

  • Introduce your clients to the licensed advisor, and explain his or her experience and qualifications as they relate to the role from the client’s perspective;

  • Have this qualified advisor deal first with a small group of clients, gradually meeting more clients over time, and handling client portfolios, personal phone calls and meetings;

  • Make sure your clients know you trust this assistant to take care of them while you are out of the office and on vacation; and

  • Let your clients know you have selected this individual to be your successor.

  • This last step is important, so make sure it hasn’t inadvertently been sidestepped over the last 18 months.

    When you have a partner or successor in place, you will want to look into what wording from a standard Buy-Sell Agreement would be appropriate for your agreement, to cover events such as disability, death, retirement, or incapacity, as well as the clauses to cover the valuation and payment.

    Having (or putting) a succession plan in place allows you and your business to be proactive rather than reactive to life events. It allows you to know what will happen however you exit, how the value of your business will be determined and if it will fit with your own family financial planning.


  • Sandra Foster, CFP, R.F.P., STEP, CHRP, CSI, FCSI, is the president of Headspring Consulting, Inc. She is author of several books including ‘Buying and Selling a Book of Business’.