Succession Planning: The Time Is Now

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According to a recent InvestmentNews article, “RIAs Must Confront the Emotional Side of Letting Go of Their Business,” of the 118,000 financial advisers planning to exit the business in the next 10 years, about 61 percent have some plan in place—whether it’s succession, sale, or client reassignment.

The article cited data from Cerulli and reported that those advisers with some plan represent 75 percent of the advisory assets that could be in transition. But there are still 39 percent of advisers who need to get into gear.

“Not having a succession plan represents a grave disservice, and shows a low regard for your clients,” John Napolitano, chairman and CEO of U.S. Wealth Management, told InvestmentNews.

Here’s where to start:

Figure out where you are. Succession planning can be a difficult process to start.

“It’s tough from a mental and emotional standpoint because you’re faced with realities you don’t want to think about,” Courtney Ellett, founder of Obsidian Public Relations, said in an AP article published in the Denver Post“What’s Next? Who’s Next? Businesses Need Succession Plans.”

Assess where you are both with the business and emotionally.

Identify business successors. Identify who you want to take over—perhaps a successful planner who’s been with you a few years or an outside buyer—who can continue the firm’s core values.

“When considering successors, make sure that they will maintain the culture that has been developed,” Ed Friedman, a director at Dynasty Financial Partners, wrote in the Financial Planning article, “The Five Cs of Succession Planning.”

Also, think about where the profession is headed and try to designate someone who is equipped to handle upcoming challenges.

“Leadership succession requires looking through a windshield rather than in the rear-view mirror,” Kelli Cruz, founder of Cruz Consulting, wrote in the Financial Planning article, “Overcome Succession Planning Paralysis.”

Think like a buyer. If you opt to sell—put yourself in a buyer’s shoes. An article in Professional Planner magazine noted that buyers will want to know whether your business model is sustainable, how your business is different from competitors, and whether you have solid client relationships because in the end, Tony McDonald, director of T&C Consulting, noted, “Those client relationships are what’s generating the cash.”


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Ana Trujillo Limón is associate editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at Follow her on Twitter at @AnaT_Edits.



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