Finance Succession Planning
To safeguard your corporate objectives, succession planning — the process of identifying, selecting, and developing individuals for future responsibilities – is crucial. Finding and developing leaders with specialized competencies means that you are always prepared for expected and unforeseen openings by having a varied talent pool of fully prepared successors.
This is critical since the Financial Services (FS) industry is facing huge talent difficulties, including an aging workforce, Millenials who are drawn to other industries, and hiring teams who are unaware of their own employees' talents and desires.
Furthermore, proper succession planning has a significant competitive advantage because it goes beyond merely replacing personnel and establishes a strategy for developing skilled talent capable of leading your company into the future.
Financial Advisor Succession Plan Considerations
In recent years, much ink has been spilled over the topic of succession planning, which has been prompted by the graying of the financial advisory business. Despite all of the attention, independent advisors are still failing to take the matter seriously enough.
Goals. Every advisor has distinct retirement goals and expectations. Consider how you'd like to leave the company in the best possible way. Do you wish to sell your company entirely or train a successor over time? Similarly, do you wish to retire completely or do you think working part-time would be more appealing? There are obviously more critical topics to consider, but if you're more open to discussing your escape route, it'll be easier to put up a succession plan that represents your retirement goals.
Type of deal structure. When considering what sort of succession will work best for your organization, client retention is likely the most critical factor to consider, and nurturing a junior advisor often produces the best outcomes. Clients are more familiar with such personnel, resulting in a more natural and seamless transfer. While getting a salary or a percentage of revenue, the selling consultant remains in the business for a few years to assist with customer retention efforts.
Timing. While most advisers identify transitions with planned exits, succession plans can serve to protect against the unexpected death or disability of a key employee. Otherwise, your company may be sold for a fraction of its true value.
Firm’s value. Trying to figure out how much your practice is worth is both an art and a science. While quantitative indicators like income and assets under management are unavoidably important in any appraisal, other, more difficult-to-quantify elements should be examined as well. Advisors must know which clients and technologies are generating the greatest money for them.
Clients. When it comes to communicating your succession plans with clients, there are no hard and fast rules. Many advisors choose to write a letter to their clients. Others would rather converse in a more personal, face-to-face context. Keep things high level, avoid too many details, and emphasize that there is a plan in place to both help safeguard their interests and ensure the account's continuity, whichever way you select.
Implementation. When expectations don't meet reality during the execution phase of a succession plan, issues can occur between the buyer and seller. When sellers refuse to attend meetings, for example, it can create a problem. Similarly, leaving advisors may feel that they are being pushed out too soon. In an addendum to the purchase agreement, outline the first six months of the transition, explicitly describing the duties and obligations of both parties.
Succession Financial Planning Partner: SFP Wealth Financial Adviser
A team of certified financial advisers provides innovative yet comprehensive investment advice and strategy for insurance coverage, investments, employment benefits, short-term health coverage across all license groups.