Picture this: over the span of your career, you’ve enjoyed helping people achieve financial success and security. You’ve helped parents fund their children’s education, and you’ve guided couples to retirement.
Now, it’s your turn to retire.
While a part of you will always miss supporting clients, you’re not worried. You know your firm is in good hands, as you created a succession plan well in advance. You received a practice valuation higher than most, all because you avoided these five costly succession planning mistakes.
Before you understand potential mistakes that can arise as you succession plan, you first need to understand what succession planning exactly is.
Succession planning is defined as a process that prepares successors to take over a business, without disrupting leadership, client service, and daily workflows.
In financial services, it has been considered a tactic to help you seamlessly exit your firm. But following the conventional definition may shortchange your practice’s valuation, payout, client retention, and competitive positioning.
Succession planning is really a practice optimization strategy. Paying careful attention to your practice’s valuation and payout is important. However, this is a valuable opportunity to look beyond the numbers and support your team and clients as you transition. It sets the stage to resolve issues, improve operations, and find the right successor who can best serve your clients.
Viewing succession planning as simply an exit strategy means you may be leaving value on the table, which can be detrimental to the success of your firm after you retire. The actions you take will determine the future success of your team and clients. Of course, similar to how you’ve been supporting them over the years, you’ll continue to strive for the best. Lead the way by avoiding these five mistakes.
One of the biggest mistakes you can make in succession planning is waiting too long to start. The most successful advisors begin the process while their practice’s performance is at its peak (usually five to seven years before they intend to transition).
However, the earlier you start, the better. You can benefit from planning even 10 years in advance. It all depends on your desired exit date and level of preparedness.
At this stage, you’re not just preparing to exit — you’re positioning yourself for future success. Early planning allows for a thorough valuation of your practice, uncovers opportunities to enhance your firm’s value, and provides the required runway to fine-tune your operations. Being proactive makes your business as attractive as possible when it’s time to transition.
As you plan your succession, it can be easy to focus mainly on financial compensation. But this is a critical error that pulls your attention away from considering one of the most important elements: who will lead your firm and manage its finances when you’re gone?
Make sure the numbers don’t distract you from finding the right successor. This will be one of the most impactful decisions you make during the process. Not everyone will make a good leader for your firm.
As you interview potential successors, ask yourself these sets of questions.
Succession planning is not a solo process. We recommend that you tap into the expertise of your colleagues and network. Get feedback from those you trust.
But most importantly, collaborate with your team. Including your team in the process is how you improve operations and solidify roles and responsibilities, ultimately leading to improved client service. Identifying and resolving these details now means you and your team will feel more confident when you retire.
Timing is key. Make sure to not bring them in too early, as it could cause excess confusion. On the flip side, if you loop them in too late, you can sacrifice trust and their adaptability to change.
An ideal time to collaborate with your team is when you’re ready to strategize roles and operations, which you can do through regular meetings and feedback sessions. Closely listen to your team’s concerns and aspirations, and include these details in your succession plan. For instance, if someone is aiming for a promotion or new certificate, clearly communicate how you’ll help them achieve this before or after you leave.
We’ve mentioned collaborating with trusted colleagues and financial professionals in your network. We’ve encouraged you to include your team. But you also need to be transparent with your clients.
Working with clients for over 20 years means you’ve built thorough levels of trust and understanding. You have been their go-to source for finances, someone they depend on for guidance during challenging times. You know the ins and outs of their financial lives, and perhaps even slices of their personal lives.
This dynamic creates meaningful, genuine relationships, so it only makes sense that your clients will be impacted upon your exit.
Your goal is to make a communication strategy that makes your clients feel supported throughout every stage of your succession plan. They should feel as taken care of as the day they were onboarded.
When planning your succession, it can be easy to focus on the specifics of your deal terms and structure. However, only concentrating on these details means you may place less emphasis on high-level objectives.
We recommend always defining the “why” behind each term. Ask yourself: what outcomes truly matter for your practice, clients, and team? Evaluating the broader impact of your succession plan supports client retention, maintains team stability, and fosters long-term growth for your business after you retire.
Remember: succession planning isn’t just a way to determine your exit strategy — it optimizes your practice for growth and long-term success.
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When you’re ready, we’re here to help you in your succession planning and practice valuation process. Until then, we’re wishing you and your clients continued success.