How is managing of the assets affected by not having a succession plan? According to current statistics, the average financial advisor is over 50 years old, and nearly half are planning to retire in the next 10 years. Most of these advisors regularly counsel their clients on the benefits of life and disability insurance, yet few have a formalized plan to protect their own business interests. In fact, it is estimated that fewer than 30% of advisors have taken the necessary steps to finalize their own succession plan or exit strategy.
By neglecting to prepare for their own future, a financial advisor places their clients, and the beneficiaries of their clients, at a greater risk. Not all advisors understand that the Financial Industry Regulatory Authority (FINRA) prohibits advisory fees to carry over to a non-registered partner in the event of disability or death. The health and longevity of an advisory business depends on careful and thorough succession planning.
Some Key Benefits of a Formalized Succession Plan:
1) Continuity of Service
The promise of continued service can alleviate any doubts or concerns in the mind of an existing client.
2) Sustain Personal Vision
By entrusting day-to-day operations to a chosen advisor, your vision for the business can be realized. Moreover, the plan will provide time for you to mentor potential leadership candidates.
3) Eliminate Risk of Liquidation
Without a clear succession plan or exit strategy, the involuntary liquidation of your business remains a very real possibility. Don’t leave the future of your business up to chance.
4) Retire On Time
A formalized strategy will keep you on track and prevent any unforeseen circumstances from delaying your retirement plans.
There are all sorts of variables that create confusion and uncertainty when developing a succession plan. Some advisors will generate a plan in their minds without actually documenting their desired outcome. This can be a potentially devastating mistake. The transition of business operations is normally a multi-step process. Without clear instructions, a business puts itself in serious jeopardy. A detailed and well-structured succession plan or exit strategy is the only way to ensure the seamless transition of your advisory practice and full realization of its value.
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