Elite Succession Planning Education Partnership Part 2

Elite_1image credit: Blue Ocean Global Technology  

By definition, a financial advisor’s job is to guide their clients and best position them for achieving their desired lifestyle and retirement vision. Ironically, these same advisors devote very little time to protecting their own business equity: generally fewer than 30% of all advisors have undergone the process of formalizing an optimal exit strategy or succession plan. A total of 4 out of every 10 financial advisors will retire in the next 10 years, and 42% of these advisors lack a succession plan.

Succession planning can be a grueling process. It takes time and energy to find a suitable successor. Even among cordial colleagues, succession objectives can differ greatly. Furthermore, the fragmented nature of the financial advisory industry mandates advisor-specific solutions.

A Fragmented Industry

Elite_2 image credit: NFP Advisor Services Group.

There are a number of reasons why advisors struggle to commit to a concrete exit strategy:

  • Inability to find a suitable successor
  • Landing on the right financial terms
  • Execution Logistics

Many advisors have neglected to address, or even understand, how their decisions impact their clients and their heirs, especially in the event of an untimely death. Succession planning continues to be a sizable hurdle in advisory practices of all sizes. The process requires more than simply redistributing clients, which is why it can benefit an advisory practice to partner with an established firm. Continuity is a persistent challenge in the transition process, and practices that opt to sell rather than partner with specialized firms often suffer from low client retention. Following a transition, one in four advisors will lose over 50% of their clients. Retention is believed to be the largest barrier to realizing value in a purchase transaction.

Elite_3image credit: Blue Ocean Global Technology 

Chris engages succession planning panelists and leaders following The Philadelphia Foundation’s CE education meeting in Conshohocken, PA on 4/24/15.

Most advisors care deeply about their clients and fear the loss of these relationships. The transition process can be inordinately stressful and fraught with difficult decisions. After spending so many years growing the business, the thought of leaving it can make even the most confident and self-assured of advisors nervous. Discussing retirement and succession plans with family is not always a pleasant conversation, but it’s certainly a necessary one.

Elite_4image credit: BizEquity

Prudent succession planning requires understanding the value of your advisory practice.

Some experts believe the industry currently suffers from a talent shortage due to a shortsighted approach to training and development. As a consequence, outgoing advisors may discover a basic lack of talent in the ranks and be forced to expand their search to other areas of the country. Between talent deficiencies and the limited opportunities for partnership, the process of succession planning has become more challenging.

The amount of work required to facilitate the transition of a business may seem daunting, but is a worthwhile investment. Succession plans should be clearly discussed with each client and employee in the practice. Legal and regulatory guidelines must be meticulously researched. Policies and procedures pertaining to technology consolidation, operations, and investment allocation must also be documented. Transition is a lengthy and complicated process, and therefore needs to be planned for well in advance of retirement.

Elite_5image credit: Blue Ocean Global Technology

Chris delivers The Case for Succession Planning  CFP Board CE program for The Philadelphia Foundation  on 4/25/15.

The mission of Elite Advisor Consulting is to provide prudent transition, contingency, and succession planning advice. We are held to the highest fiduciary standard. We help our advisory clients manage risk and protect their families.

 To learn more about partnering with Elite Advisor Consulting for Succession Planning speaking engagements, education programs, and workshops, please contact:

Chris Orlando
Chief Executive Officer