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Overcoming 3 Major Barriers to RIA Succession Planning

A thoughtful, durable succession plan will increase the value of the enterprise for all concerned, from the founder to her internal successors, the entire support staff, and clients.

We all know the veteran RIA owner’s lament.

“I started this business from scratch 30 years ago. It’s my baby, and I love it. And yes, of course I want to provide a leadership path for my top team—I’m just not ready to give up control just yet.”

The owner is talking about succession planning, and his hesitancy is understandable. It’s also unfortunate.

A thoughtful, durable succession plan will increase the value of the enterprise for all concerned, from the founder to his internal successors and the entire support staff. It’s also a boon to the firm’s clients, who can rest easy knowing they—and maybe their children—can collaborate for years to come with a firm whose culture and style they admire.

Besides, in most of our succession coaching with financial advisory firms, the founder remains an active participant for years, sometimes decades, after a plan goes into action. It’s actually a rare internal succession plan that calls for a founder's immediate departure.

But there’s nothing easy about initiating a thorough and far-reaching business process that combines a significant transaction and an eventual leadership change. To help RIA owners, we’ve identified three major considerations for smooth succession planning. Those are:

  • Timing
  • Valuation
  • Access to liquidity


When to get going on a succession plan is always a tough call. And it gets tougher if the firm owner had to overcome logistical and emotional barriers.

Maybe as the owner, you think now’s not the time, you’ve got too much on your plate as it is—and no doubt you do. In that case, it’s easy to persuade yourself that the issue of succession isn’t paramount just yet, and that, well, you’re still too young for all that sunset malarkey.

Sometimes an RIA owner thinks he and the business he’s built are the same thing. And that’s understandable to anyone who’s owned an enterprise of any sort, paper route or multinational. Owning a business can be all-encompassing. For many owners, it’s unimaginable fun watching an idea slowly taking shape, adapting to market conditions, and coming out, against the odds, with a business of transferable value.

To realize that value, however, it may help to step back emotionally and start training yourself to regard your baby with detachment.

Finally, we often hear from would-be successors—here, usually a founder’s kids—who want to get the succession ball rolling but fear the founder will dig in and refuse to consider the matter, even in terms of exploration.

To prompt a hesitant RIA owner to give succession planning some serious thought, it may be useful to know that the barriers around timing we just ticked through—procrastination, overattachment and familial deference—are entirely bogus. And their constant repetition does nothing to alter that.

Once immersed in succession planning, we often find that even stubborn owners do a 180 as they begin to discern the prize before them: a large financial reward and, if they like, a chance to stay engaged in the day-to-day work of helping to run a successful RIA.

The final say on timing? It’s never a bad time to make your business more resilient. The smart players avoid the emotion, lay down the foundations of a plan and get going.


Even though it’s essential to have a sense of your firm’s value if you hope to move confidently to extract value from it, you probably don’t know what your firm is really worth. It’s actually common not to have at your fingertips an accurate and up-to-date valuation third-party report of your enterprise. One reason? Reliable valuation reports are typically prohibitively cumbersome and expensive.

Still, people don’t change when they see the light: They change when they feel the heat. But a valuation undertaken to support a deal linked to a specific succession plan that’s already in the works is going to be rushed and possibly incomplete. Worse, the end result may be viewed through a lens of desperation—as in desperation to get a particular deal done.

It’s always better to have a complete valuation that can be updated as needed. This approach fosters clearer and more deliberative thinking around succession planning in general and leads to better succession outcomes.

But any sort of robust valuation process presupposes good financial reports on the business. So keep those books tidy.

Access to Liquidity

We’ve seen there’s no good or bad time to start the succession process, and that an accurate and ready-to-go valuation of your business is key to a successful transfer. Now we’ll touch on money, which can be rather important to a smooth changing of the guard.

There’s nothing to say a succession plan has to center on an owner's internal colleagues. Outsiders can and do step up in these cases, sometimes—and for any number of reasons—in outright preference to insiders.

Even when a firm’s younger executives are given the opportunity to buy in, however, they may have trouble raising the capital to fund a purchase. When that’s the case, the firm may look to traditional sources of lending.

But banks are slow, and don’t understand the ins and outs of the wealth-management business from the perspective of an independent RIA—they also in almost all instances, require personal guarantees which can be difficult for a variety of reasons for a younger generation.

Revenue Participation

An RIA owner can get access to capital through a revenue participation program, while not ceding a shred of control over the business: big picture, small picture or day to day. This is equity-like in that the capital provider is incentivized by your growth. This shows through in the structure of the revenue participation, which shouldn’t take or seek any management role in your business whatsoever.

The transfer of a business you’ve worked many years to build should happen on your terms. That said, it’s never easy to select a team or individual to take over from you (in due time). Equally, it’s no cakewalk to achieve an accurate and dynamic valuation, or to secure capital to underwrite your firm’s next-generation leadership.

But it’s all worth it, every step, because it’s not just about you “taking money off the table,” as they say. Without glossing over that vital aspect of succession planning, it’s really about laying the foundation for an enduring business legacy—one that may well outlast you, and your successors.

Ed Swenson is President of ASx and Chief Operating Officer of Dynasty Financial Partners, a wealth-management platform provider based in St. Petersburg, Fla.

TAGS: Careers
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