Long Live the King: The 3 Keys to Succession Planning for Advisors

By Wes Campbell, Account Manager on Wednesday, August 24th, 2011

Every day, I talk to advisors about their business. One of the most popular subjects we discuss is succession planning. It’s a hot topic these days, and as a result of my conversations, I’ve decided to do a bit of research into it. Now, just to be clear, I’m not someone who plans on ever owning my own advisory firm, but I find the topic to be very intriguing nonetheless. After reading many articles and even sitting in on a succession planning seminar at the TD Ameritrade conference, I’ve come to realize just how complicated it can be to successfully pass the torch from one advisor to another. 

Although I hardly qualify as an expert, my research has told me that there are three essential components to succession planning: start planning early, seek outside advice from other advisors, and identify and develop internal talent.

First, start planning early.

When it comes to succession planning, one of the most common mistakes that advisors make is that they don’t give themselves enough time to prepare their successor for the change. Many advisors get so caught up in the day-to-running of their firm—and the servicing of clients—that they relegate succession planning to the back burner. Months and years pass. And the succession planning that is so vital to the firm’s long-term viability is sadly neglected.

We all know what it’s like to be so consumed with immediate business concerns and priorities that we give short shrift to important matters down the road. But with succession planning, it’s important to break this pattern, and instead, make every effort to leave plenty of time for your succession plans to develop, mature, and play out. Most experts recommend preparing for your succession years in advance. Give your successor the time he or she needs to learn the intricacies of running the firm, and to feel comfortable in the role they’ll be assuming. As a rule of thumb, it’s never start too early to start this process.

Second, seek advice from other advisors.

You’re not the first advisor who’s wrestled with the issue of succession planning. Others have come before you, and many of them can teach you plenty about the challenges they’ve faced and overcome. 

So don’t be afraid to consult your colleagues and competitors in the business. You’ll find that they may open to you with ideas that you may have missed or mistakes that you’ll want to avoid. You can also consult business owners who aren’t in the advisory business. Even though they’re in a different line of work than you, they may have useful business insights that are applicable to your particular succession situation. Learn from others—and build on the lessons they impart. 

Third, identify and develop internal talent.

You don’t necessarily need to go outside your firm to recruit your successor. The right candidate may already be working for or with you. Perhaps it’s a family member. Perhaps it’s a trusted colleague to whom you’re not related. Either way, it’s important for you to identify internal talent early on—and help your protégés develop the essential talents for running your firm. You’ll find the more that they learn and grow, the easier the process will be for you. In fact, once you identify an ideal fit, it may be a good idea to give your presumptive successor a small stake in your company. When you hand over the reins slowly, you’ll discover that the transition can be seamless and transparent—with no disruption to your business, client relationships, and bottom line.

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