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Five Planning Steps for a Smooth Succession

It’s work that requires forward thinking and taking a risk with no guarantees.

One of the most common questions I hear from financial advisors who are on teams is about succession planning. Whether it’s the senior financial advisor (team leader) thinking of slowing down (or retiring), a junior financial advisor asking for a roadmap, or even a sole practitioner thinking of selling their practice—it’s become a serious industry issue.

Succession planning is not easy; many businesses find themselves seriously challenged in this area. However, our research and work with elite teams has enabled us to study succession planning, which I’ve taken the liberty of distilling into five steps. 

As you read through the following, you’ll recognize the complexities involved. Don’t let this deter you. All of this just requires thought, patience, work, compromise, and a bit of luck (it’s a people process).   

1. Partner Selection

Whether it’s a family member, a friend, a financial advisor who has been recommended to you or an ambitious young colleague you’ve been observing, getting this step right is critical. It’s important that whomever you’re considering possesses the following:

  • Work Ethic
  • Integrity
  • Capabilities
  • Age
  • Attitude
  • People Skills
  • Leadership Qualities
  • Ambition

2.  Role Definition

This step requires clarity and must have mutual buy-in; the senior financial advisor must be willing to delegate, while the junior advisor must be willing to embrace the totality of the role.  Some of the more common junior financial advisor roles include:

  • Relationship management of smaller clients
  • Helping service larger clients
  • Meet with and develop a professional relationship with children of top clients  
  • Enroll in CFP programs to become the planner for the team
  • Uncover new assets from existing clients
  • Prospect for new clients
  • Oversee the team’s social media presence

3. Integration

Here is where you’re developing your team’s story. The objective is to be able to communicate what you’re doing and why you’re doing it, both internally and externally. This should be addressed from two viewpoints:

Senior Financial Advisor

  • Why did you bring on this new team member?
  • How does this benefit your clients?
  • When do you plan on retiring? (Often this isn’t communicated until Step 4.)

Junior Financial Advisor 

  • Why did you join this team?
  • What’s your role on the team?
  • What sets this team apart?

4. Role Evolution

This is where we’re dealing with three phases of a junior financial advisor systematically becoming empowered with more responsibility, which will ultimately lead to ownership transfer. With each phase, the senior financial advisor delegates more responsibility, which allows the junior financial advisor to continue to grow. These phases are all about experiential learning; the senior advisor is learning to let go and the junior advisor is learning how to take ownership of more important areas of responsibility. The length of each phase will be dependent on the timeline and action plan, but generally, 12 to 18 months. The phases will look something like:

Phase One: Junior Financial Advisor Acclimates to Team

  • Role definition as outlined in Step 2.

Phase Two: Senior Financial Advisor Delegates More Responsibility

  • Relationship management for a group of larger clients
  • As the team’s CFP, preparing financial plans for clients
  • Continue to work with the next generation of top clients
  • Meeting with top clients with senior advisor as CFP
  • Managing support personnel
  • Acquiring assets from larger clients
  • Acquiring clients with more affluence
  • Developing relationships with young professionals (e.g., CPAs, JDs)
  • Manage the team’s social media

Phase Three: Senior Financial Advisor Begins the Actual Succession

  • Becoming primary financial advisor for all top clients
  • Assume leadership role in team
  • Manage all referral alliance relationships
  • Delegate as much of Phase One responsibilities as possible
  • Assume responsibilities as primary business developer (rainmaker) for team.
  • Establish annual growth goals for team
  • Assume financial responsibility for both acquiring and leading the team

Phases Two and Three can only be built on the successful execution of the previous phase. Performance of both senior and junior financial advisor will signal whether or not to move forward to the next phase.  

5. Staying the Course

This step will determine whether your succession plan will be successful or an exercise in futility. Both parties need to stay true to their part of the agreement. Many succession plans crash and burn somewhere in Phase Two or Three because either founder or successor doesn’t live up to their role in each phase. Here are a few tips:

Senior Financial Advisor

  • Let go (leadership responsibilities)
  • Adhere to the succession timeline
  • Develop new routines to replace old
  • Maintain a healthy relationship with Junior Financial Advisor

Junior Financial Advisor

  • Step up (embrace leadership responsibilities)
  • Develop your vision
  • Be patient
  • Build your personal connection with existing clients
  • Continue to execute the action plan
  • Maintain a healthy relationship with Senior Financial Advisor

As you read through these steps it’s easy to understand why many financial advisors put off succession planning. It’s work that requires forward-thinking and taking a risk with no guarantees—but done properly it’s a win-win-win-win (clients-personnel-Senior Financial Advisor-Junior Financial Advisor).

Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients.

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