What can move advisers to create a succession plan?

Winston Churchill is credited with the saying, “Never let a good crisis go to waste.”

Who hasn’t sat on a plane during a bout of turbulence and reflected on all the things left undone at home writing a will, storing passwords in a safe place, having enough life insurance. A crisis is often a moment to think about what we should have done to prepare better. Yet when the crisis subsides, and the plane lands, we often go back to our busy lives and put off planning yet again.

Surveys tell us that only about a quarter to a third of advisers have a succession plan. Incredibly, this statistic has barely budged for at least 10 years despite the aging of our profession. This suggests that perhaps 75% of advisers are by default waiting for a crisis to address their continuity needs.

It seems as though the pandemic should have been enough motivation for many advisers to engage in continuity planning. Yet the government’s bailout of the economy and stock market, combined with the convenience of Zoom, conspired to allow many to waste the crisis.

As advisers, we guide our clients to prepare for the unknown and unexpected. Yet when it comes to our own businesses, we are still eminently human. If the pandemic wasn’t an adequate wake-up call, experience tells us there are three other types of crises that do trigger sudden succession, often with sub-optimal results.


A serious health scare for an adviser or their spouse is certainly a crisis that can motivate change. Advisers often like to say they’ll “die with their boots on,” even though we know that when clients say the same thing, it rarely plays out as hoped.

Without a succession plan in place, a health crisis creates a burden for staff, risk for clients and frenzied calls to potential succession candidates about how quickly they can take over.

Of course, succession is a process often measured in quarters rather than weeks. Just because a colleague can step in briefly doesn’t mean they have the ability or even desire to take over an entire separate practice, especially without adequate lead time.

If you currently have a continuity partner in place, at least have a conversation with them about what would happen in the event of a more protracted health event. Do they see themselves as a continuity partner or a true successor? Ask yourself the same question if you’re someone’s continuity partner. Contemplating a forced change is unpleasant but as fiduciaries, advisers must do this work.


For many advisers, continuity and legacy are important succession considerations. One of the best ways to ensure that a company’s culture and approach survives the founding adviser is by identifying and training internal successors. However, the process of finding and preparing a second-generation adviser to take over a practice can take as long as 10 years. While many advisers dream of this type of internal succession, lack of long-term planning usually takes the option off the table.

Worse still is the late realization that a potential successor either can’t or is not interested in purchasing the lead adviser’s practice. Entrepreneurs often see the world through the lens of their own success. It’s hard for founders to understand that a second-generation adviser might not see an acquisition as the opportunity of a lifetime. However, many non-founder advisers are employees for a reason, often placing greater value on their work-life balance over the risks and stress of being a business owner.

Finding this out too late can be a shock for the founder and certainly narrows their succession options. To avoid this crisis, evaluate your team realistically. Start having the succession conversation 10 years in advance of possible retirement (this means mid-50s for many of us!)

Ask candidates if they are interested, what skills they would need to step into the owner’s shoes (such as rainmaking), and track their progress in acquiring those skills. Finally, consider starting the partnership=equity conversation sooner. Most junior advisers would naturally be intimidated by suddenly being asked to write a multimillion dollar check. Starting with a small ownership stake and growing it over time (while gradually relinquishing control) could overcome the financial hurdle.


While we haven’t experienced one of these in a while, certainly the stress, cost and uncertainty of a recession is enough of a crisis to force change. In advance of the dot-com and real estate bubbles, few expected the party to go on forever. Today, many would agree that at some point government stimulus will no longer be there to excite the animal spirits, and a correction will ensue.

We all know that in today’s markets, everything is expensive, from stocks and commodities to cars and financial planning practices. Some advisers are selling high, some are selling and staying and others are simply staying.

After the upheaval of the pandemic, the next recession could bring the long-predicted retirement wave. While there will certainly continue to be appetite from buyers, the reduction in liquidity, fewer qualified buyers and the fog of upheaval will make planning and executing a succession that much harder. An adviser retiring during a recession could certainly see a lower valuation versus negotiating now for a planned exit later. In today’s environment, successors are open to all scenarios.

Humans are both habitual and adaptable. We long for the stability of routine yet have the ability to shift as needed. This is especially true of our profession, with its endless surprises.

By having timely, honest conversations and practicing what we preach, advisers can create a softer landing for themselves in the event of a crisis. Rather than push succession down to the bottom of the to do list yet again, this can be the time to finally make the moment count.

[More: Slow your roll: Selling a practice takes time]

Nathan Munits is president of Longwave Financial.

The post What can move advisers to create a succession plan? appeared first on InvestmentNews.

Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.

Andrew Vincent
Andrew is half-human, half-gamer. He's also a science fiction author writing for BleeBot.
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