A Succession Plan Should Be A Lot More Than A “Will” For Your Practice

By Ryan N. Shanks, CEO, FINETOOTH CONSULTING on Thursday, January 19th, 2012

The good news is that about 60% of advisors now have written succession plans in place. The bad news is that these plans are rarely more than the corporate equivalent of a last will and testament.

Many advisors I work with only took the effort to write a succession plan in the first place because their clients were nervous about where their accounts would go in the event of a death, disability or sudden forced retirement.

That’s definitely a minimum requirement. None of us are getting any younger and if you’re like most advisors, you’re skewing into your 50s if not beyond.

The entrepreneurs and business owners among your clientele know that key person planning is crucial to the survival of any organization. You may even have been the one to set up their succession plans.

But simply assigning responsibility for your “dependents” -- the clients who truly do depend on you -- if you’re forced out of the picture is not enough.

Sooner or later, you will want to retire. That means handing off your business to someone else to take over, and not just winding down the accounts.

That’s where the “succession” comes in. You don’t have to pick someone today, but if you have someone in mind like a partner or junior colleague, spell out how the transition will work.

Provide a timetable with milestones. Perish the thought that you’ll die tomorrow, but you have a lot more control over when you expect to retire -- and what you do with the time between then and now.

Know what your practice is worth, not only for your own retirement planning but so you can have financing in place if your successors need it to buy you out.

Consider the estate planning vehicles you may suggest for your clients: life insurance to smooth any unexpected transition, even trusts to hold your equity in the business and reduce the tax implications.

I just read about a firm the other day that wound down because they couldn’t find anyone who wanted to buy it.

Don’t let that happen to you. You want to pass on a living, healthy business that someone would reward you for all the years you invested in it.

That’s what the “succession” is really all about.

Ryan is the Founder and CEO of Finetooth Consulting, a national boutique firm providing business advice to Advisors and the firms they partner with. He started the firm in November 2006 as he recognized a need for advisors to have someone represent their interests in the market, much like the representation of an athlete by a sports agent. Ryan is also the Co-founder of Join A Firm, an online recruiting service that helps financial advisors and firms connect, allowing advisors a turnkey transition to independence by joining existing firms.

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