4 tips for building succession plan for advisors

Remember the old proverb “a shoemaker’s children always go barefoot?” Its meaning holds some truth: in serving others, we often neglect the needs of those closest to us – including ourselves.

Succession planning is a case in point. As an advisor, you may have supported many business-owner clients in planning their business succession. But have you thought about your own?

If you’re still in the business building stage, or under age 50, an exit plan may be the furthest thing from your mind. And fair enough. But if you’ve spent years building a successful advisory practice – and you anticipate working less and spending more time doing other things in coming years – now is the time to “stitch your own shoes” and put a plan in place.

Here are four tips that can help you build a successful plan.

Tip #1 – Know your goal

Some advisors plan to (and do) work into their 80s and will always want a hand in the business. Others are happy to close the office door for the last time and never look back.

Good planning starts with a vision of your desired end state. You’ll want to consider your preferred lifestyle (where you want to live, how you want to spend your time), the level (if any) of continued involvement in your business, and the resources you might need to make it happen (from both a technological and human resources standpoint).

By knowing what you’re trying to accomplish, you can set the right strategy and determine the right tactics to get you there.

Tip #2 – Understand what’s possible

You know it too well – there are many different advisor channels, and some provide more freedom than others in terms of business succession.

“Much can depend on whether the advisor works on the insurance side, the investment side, or a combination of both,” says Wayne Miller, Associate Vice-President, Strategic Business Development. “It’s important to understand the range of options that apply to the advisor’s own unique situation.”

If you work under the umbrella of a larger institution, make sure you understand any restrictions involved in transitioning to retirement or to a different work model. If you’re an independent advisor, talk to your Dealer or Managing General Agent about the process. What have others done? What are some success stories? Have they identified a pool of younger “go-getter” talent that might be eager to grow into a business that they can ultimately take over?

Tip #3 – Develop your plan

By combining tip #1 (your goal) with tip #2 (what’s possible) you can arrive at a plan that’s best for you – and ensure your clients continue to be well served.

There’s no one-size-fits-all. You may want to exit on a particular date – or choose to leave your business gradually. You might choose to coach and mentor someone to take over your business, or simply sell to the highest bidder. But two things you might need:

  • A valuation: A professional business valuator (who knows the industry) can do more than just reveal what your practice may be worth: they can also highlight opportunities to maximize its value.
  • An associate: If you plan on the coach and mentor route, it’s never too early to find your “mini-me.” It’s a networking game, so put out feelers to others in the industry.

Tip #4 – Allow lots of time to execute your plan

The planning and implementation of a sound exit strategy can take years. Give yourself the advance time you need, as there can be hiccups along the way.

“I’ve seen many cases where the associate being groomed to buy the business simply doesn’t work out,” says Miller. “For your sake and your clients’, you need the right person, and sometimes it takes more than one kick at the can.”

All the more reason to start your business succession planning now rather than later. Even if your goal of transitioning your practice is several years in the future, it’s truly never too early to start putting some planning steps in place.