Need a Succession Plan? 3 Questions to Help You Get Started

Professional Development

Need a Succession Plan? 3 Questions to Help You Get Started

It's a conversation I wish I can say was unique. Sitting in a Miami office, appreciative of not being outside in the humidity, I sighed and looked across the table at an equally exhausted adviser before asking yet again, “What would you tell your client who wasn’t sure about their future?”

You’d immediately be able to tell from our body language that we’d been at this conversation for quite some time—for almost a year in fact.

“I’d show them the financial plan and ask them again if their goals had changed for retirement,” he suggested, tentatively. We were struggling with the hurdles of bringing this financial adviser in for a career landing following an impressive 35 years helping his clients.

When it comes to succession planning, many advisers aren’t heeding their own advice. Less than a third report having a formal succession plan, according to the latest research from FPA and Janus Henderson. This is concerning for many reasons. A lack of a plan makes it less likely that advisers will achieve their retirement goals, causes stress for their teams, and may negatively impact clients.

In 2015 only 28 percent of advisers had a formal succession plan. Fast-forward three years and that figure has barely budged.

The research shows that advisers are well aware of the risks. So what’s the holdup? Advisers and the teams surveyed cited finding the right person as the most common barrier to creating a succession plan. In my experience with Knowledge LabsTM and by researching the industry and coaching thousands of advisers for the greater part of two decades, I understand why they’d falter at this stage: most have deep financial and emotional ties to their practices. Transitioning a team and clients to another person is a big decision—one that intertwines financial needs in retirement with issues regarding an adviser’s identity, sense of obligation to clients, desire to maintain control, and the vision of the practice’s future.

If these underlying issues aren’t addressed, then identifying and grooming a successor becomes that much more difficult. On the flipside, answering some core questions about what you want can help you set the direction for the future of your practice and lay the groundwork for cultivating a successor and your own transition to retirement.

Succession Planning? It’s Personal

FPA released a report in 2015 that noted only 28 percent of advisers had a formal succession plan. Fast-forward three years and that figure has barely budged. The recent study showed that just 27 percent of advisers had a documented succession plan in place. The lack of planning was especially pronounced among advisers or teams managing less than $50 million—only 14 percent in that cohort reported having a succession plan. The research included responses from 390 financial advisers/planners and team members. [FPA members can go to and click on Research and Practice Institute to download a full survey report.]

More than one-third, including the adviser in Miami, reported finding the right successor as their top issue. Personal concerns understandably come into play as well. Consider that 74 percent of advisers report that while their businesses may be ready for transition, they’re not sure they are ready to retire. Others who responded to the survey worry that the business won’t be as successful if they’re not there and say that it’s hard to think about moving on from their practices.

These are common sentiments for advisers nearing retirement. I was recently working with an adviser in Cleveland whose father-in-law owned the practice and planned to transition it to him. In this case, the team had a succession plan in place, but the supposedly retiring adviser didn’t want to leave. So, the plan became essentially meaningless because the senior adviser created it without contemplating the bigger issues. What did he want to do next? How would he relinquish control of the practice he built? What would he do if he wasn’t a financial adviser? Did he even want to retire?

When it comes to succession, the planning process is as important as the end result. Whether you ultimately sell your business outright or identify an internal successor, it’s important to start with a deep understanding of what you need to move on. Only then can you create a plan that makes sense for you and whomever is following in your footsteps.

3 Key Questions

A solid succession plan may take seven or even 10 years to implement. Begin contemplating these questions now and you’ll be ready to take the next steps toward your own retirement:

Moving Forward

The FPA and Janus Henderson research shows that when it comes to succession planning, many advisers are stuck. As the adviser from Miami learned, digging a bit to identify the true issue motivated him to spend more time mentoring a junior member on his team who his clients already knew and trusted. Together they came up with a five-year plan to transition the business. He’s now enjoying retirement in the Florida Keys and is pleased to know his clients are still getting the type of support he signed them up for in the first place.

Use these three questions to jumpstart your planning process and provide some solid guidelines for what you need from retirement and what you want for your clients. The answers will help you develop a succession plan that meets your personal goals, begin to identify individuals who are a good fit, and set yourself up for an easier transition to whatever comes next.

Learn how to strategically position your practice's legacy with our Succession Planning resources.