I go to conference after conference and listen to speakers talk about succession planning. I read article after article on succession planning in industry publications. I listen for what’s new in succession planning—nothing, if I’m being honest. In fact, it’s beginning to feel like old news that many advisors simply don’t want to hear.
Every consultant in the industry talks about the following topics:
- Finding the right fit in a successor
- Internal versus external succession
- The due diligence that both the buyer and the seller need to do
- The variety of approaches to address valuation
- The range of terms and how each deal needs to be structured for the buyer and seller
- Financing options for the buyer
- The seller’s role in providing post-sale support throughout the transition
We’ve been having these conversations for more than a decade now. Granted, this is the first generation of advisors who will sell their businesses. And the deals will vary widely, from the simple solo transaction, to the merger, to the sophisticated acquisition required for super ensembles.
No one is saying succession is easy. But at the same time, are we making it harder than it has to be? Are advisors using the notion that there’s so much to learn as an excuse for never getting around to formally documenting a plan? If we’re being honest, we should probably admit that a good chunk of what makes succession challenging is between our ears.
Your Clients Deserve an Answer
The common denominator in succession planning for all advisors is that clients deserve to have a straightforward answer to the question, “What if something happens to you?” But in this wonderful industry, where advisors derive so much satisfaction from their work, there is often little motivation to ensure that there is an answer. We don’t want to admit that we are replaceable. On top of that, so far the industry appears to be content with the aging-in-place approach, as more advisors shift to lifestyle practices. That doesn’t mean we should get a free pass on attending to this issue.
As we approach the end of the year and look forward to 2015, now would be the time to commit to creating your succession plan. For those advisors who are still as sharp as a tack, why not make 2015 the year you commit to putting the contingency buy-sell for death or disability in place—just in case. You can continue to work while simultaneously ensuring that you’ve done the right thing for your clients.
Financial advisors frequently talk clients through their needs, fears, and goals, yet many are reluctant to address their own risk management—even when, for many, their practice is their biggest asset. Perhaps you, too, need someone to talk you through your needs, fears, and goals. That’s not usually covered in all the industry conferences and articles on succession. But there’s value in having a sounding board—a coach, a friend, or a partner—someone you can be open and honest with about your future. However you need to go about it, resolve to address the succession planning issue in 2015. It’s the right thing to do.
Joni Youngwirth is managing principal, practice management, at Commonwealth Financial Network®, member FINRA/SIPC, an independent broker/dealer–RIA.