Essential Strategies for Succession Planning: Initial Questions and Preparations

According to a recent survey by FMG Suite, a startling 73% of advisors do not have a written succession plan, but 60% of those same advisors are planning to
retire within five years. While building a comprehensive plan can be a time-consuming process, it ensures that your life’s work will continue after you’ve ridden off into the sunset to enjoy the next phase of your life. In order to provide your team with the best chance of success, you should start considering your succession plan as soon as possible and make adjustments along the way to support the sustainability of your firm.

When Should you Start Considering Your Succession Planning?

Ideally, you should begin evaluating possible transitions as soon as your business is viable. Once you feel that you have mastered the tools of the trade and feel confident in your advisory skillset, it is time to consider possible next steps for business development. This can include onboarding a team to expand your reach, or simply acquiring a book of business to expand your current client list and AUM.  Regardless of which path you take, you should start considering your options, grooming a second in command, and deliberating possible next steps for your firm.

Under What Conditions Would a Transition Take Place?

Having a firm plan of the conditions you’d need to transition will help you immediately consider or reject any incoming terms, as well as providing a logical framework for an otherwise sentimental decision. Write down the answers to these questions and use it as a personal reference as you start considering your options:

  1. In an ideal world, how long would you like to keep working at your firm?
  2. If something minor goes wrong with your health or personal life, how might it shorten this timeframe?
  3. If something major goes wrong with your health or personal life, how might it shorten this timeframe?
  4. Who would handle your current accounts if you had to take short-term leave?
  5. Who would handle your current accounts if you had to take long-term or permanent leave?
  6. What is the minimum amount you would be willing to sell your stake in the firm for?
  7. What would you ideally like to sell your stake in the firm for?
  8. Are there any personal or financial roadblocks preventing you from retiring or selling your business?

Once you have written out the answers to these questions, you’ll have a better understanding of your position that will help you make the right decisions with your upcoming strategies.

Is Your Team Ready to Make Changes?

As you begin your succession planning strategy, it’s essential to take an honest look at your team. Consider their personalities and capabilities both as a close colleague, and from a client perspective. Is your team capable of running your firm with minimal input from you? Is there a natural leader who would be able to take the helm if you decide to leave? How would the other team members react to having this person manage the business? If you see a natural choice for a successor, it might be right timing for a conversation with them to determine if they are interested in being a part of your succession plan.  If you are aligned that the fit is a good one, you can also start allocating more responsibilities and grooming them for the promotion. If there isn’t an obvious choice, it may be time to bring in a fresh perspective with new hire(s.)

Succession planning is an essential part of growing your business, and it’s important to ask these questions as early as possible. Once you have evaluated your position from both a logical and emotional standpoint, you will know how to prepare for your next steps

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