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RIA Edge: Preparing for Succession

RIA Edge: Preparing for Succession

Too many RIAs fail to clear a path for junior advisors to take over, threatening the future viability of the business. A panel of practice management consultants at Wealth Management EDGE discussed why that’s a mistake and what advisors can do to change it.

Too many RIAs fail to clear a path for the next generation of advisors to take over their firms’ leadership.

Less than 40% of RIAs have a succession plan in place, said Mary Kate Gulick of FiComm Partners at RIA Edge, part of Wealth Management EDGE at The Diplomat Beach Resort in Hollywood Beach, Fla. Partially, that’s because a proper succession plan takes time and effort that can’t easily be spared when running the day-to-day business.

Yet failing to plan has real implications, the panelists said. Moderated by Carina Diamond of Stella Secunda, the panelists, including Gulick, Jared Chase of SEIA and Shauna Mace of SEI, said a lack of a succession plan does a disservice not just to the next generation of advisors but also to clients and threatens the firm’s future viability as those senior advisors scale back their efforts, retire or become incapacitated. Mace referred to a recent SEI report which found that 85% of growth at firms is driven by senior advisors.

Different Talents

Senior advisors shouldn’t be looking for a carbon copy of themselves to take over. Senior advisors tend to have global knowledge of the industry and business details that the next generation may be unable to replicate. Chase said the firm founders may have the entrepreneurial spirit, but the next generation brings other things, like a better grasp of technology.

Given their experience with social media platforms like TikTok and Snapchat, many next-gen advisors are natural marketers, and that’s important given changes in how prospects find a firm. Among consumers under age 60, only 29% care about referrals, said Gulick. So, future growth won’t come from traditional rainmaking techniques; instead, it will be based on digital and social media activities. Senior advisors need to shift their mindset and give the next Gen the opportunity and support to do the activities they excel in.

Practice Management

One thing firm principals can do to help the firm’s future sustainability is to set up repeatable practice management and business workflows that younger advisors can replicate. It also helps to educate younger advisors on the mechanics of the business, including basics like profit and loss statements. Often, the panelists said, helping younger advisors understand the firm’s profitability and financial value opens conversations around whether or not the junior advisors want to invest in an ownership stake. 


The panelists agreed that communication is critical, although too often overlooked. Senior advisors should be open with clients and employees about what’s happening within the company. Start early so it doesn’t come as a surprise, and clients can get used to the idea that there will be a change in leadership, the panelists said. Clients and employees won’t be as fearful about what’s coming next when they have complete information.

Mace also urged senior advisors to develop friendships and share their goals with their clients. Start early and give them time to get to know the individual who’s taking over so it’s not a shock to the system when the announcement is made. When clients are part of the process, they’ll feel more secure.

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