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Finding the keys to success in succession planning

Bryan Powell, Senior Director, Practice Management, discusses how advisors can build a foundation of success when navigating succession planning.

Bryan Powell, PCC, CPBA, CPMA

Bryan Powell, PCC, CPBA, CPMA

Senior Director, Practice Management

Oct 10, 2023
6 minute read

Key takeaways:

  • Preparing to retire and sell one’s practice is an experience that’s often fraught with emotion.
  • Acquiring firms tend to overlook this emotional aspect and would benefit from taking the time to inquire about the retiring advisor’s needs.
  • Communication, understanding, and patience can help ensure a smooth transition for everyone involved, including the most important individuals: the clients.

As a coach and consultant, one of the scenarios I have been honored to participate in is when a successful advisor is ready to retire and sell his or her practice. When I partner with high-performing teams that are getting ready to acquire a practice, I’m always curious about the journey the retiring advisor has taken and the emotions that arise when anticipating this dramatic change.

These entrepreneurs have spent years of their lives making phone calls, conducting meetings, and building relationships. Quite often, there have been sacrifices along the way, whether it’s missing their children’s school events or lost weekends spent holding client seminars.

Now that they are ready to move on and enjoy the next phase of their life, there are emotional attachments that need to be accounted for. Having spent nearly a decade assisting advisors with these transitions, the acquiring practice in their excitement almost always misses the mark in terms of understanding the journey the retiring advisor has gone through – and more importantly, is about to enter.

To help other advisory teams avoid these missteps, I wanted to share three areas to focus on at the beginning of the relationship to help ensure a smooth transition for everyone involved, including the most important individuals: the clients.

1. Listen to understand

What inspired me to write this piece is a coaching session I recently conducted with a large team that has entered a succession plan with a senior advisor. When we started working together, the senior leaders on the team expressed some frustration that the retiring advisor was not adapting to their processes for uncovering additional assets from the clients.

From my perspective, their frustration stemmed from the fact that they missed the opportunity early on to ask the retiring advisor what he needed in terms of support to make a successful transition. When we finally raised that question, the retiring advisor stated that he simply needed patience. After all, he had been doing things a certain way for over 30 years, and it is human nature to be fearful of change.

To be clear, these acquiring advisors did nothing wrong. They simply fell into the trap that 90% of all acquiring practices do, which is to say they focused solely on the clients they will be inviting into their practice and neglected to think of the advisor who had previously served them.

Before you engage in a succession plan, take the time to listen. Hold a meeting with the retiring advisor to inquire about their needs and what they value.

Here are a few questions to consider asking to help you understand the retiring advisor’s perspective:

  • How can we support you through this transition?
  • What do you need from the team to assist you in the change you are about to experience?
  • What does success look like to you when thinking about the succession plan?

2. Allow ownership in the practice

In another instance, I facilitated an annual offsite for a large wirehouse team. During our time together, I formed a relationship with one of the advisors who had started executing his succession plan almost a year ago. During our conversations, I learned how this individual had worked tirelessly to build his business entirely on his own.

We conducted a DISC workshop, and I was curious how the strengths of the retiring advisor were being utilized by the acquiring team. Specifically, how could this advisor assist the team in reaching their goal of going from $2B in assets to $5B? We began to create a plan of how the retiring advisor could lead an initiative to measure the results of the team’s business development efforts.

The way the advisor lit up was amazing. He had so much to offer and was not ready to just sit in the background. Again, I want to state that this team did nothing wrong, as most firms on the receiving end of succession plans are focused on adding production and revenue to grow the business, which is only natural. However, that means they often miss out on the value the retiring advisor has to offer.

To avoid missing that opportunity, hold a conversation with the retiring advisor using some of the following questions as a starting point:

  • What are your strengths and how can they be applied to assist the team in the transition?
  • Where would you like to be involved and continue to have ownership in the practice?
  • How can we utilize your wealth of knowledge and experience before your retirement?

3. Own your responsibility

Succession planning is not just about acquiring a practice and adding to your bottom line. You have taken on the responsibility of caring for clients who may have had a 30- or 40-year relationship with the retiring advisor. But you have also taken on the responsibility of assisting the advisor through this transition.

There will be emotions involved, changes that will need to occur, and doubts that might creep in from time to time. Practice patience, as in your excitement and drive you may want things to change quickly, but it will take time to adapt to “your way.”

Importantly, be mindful of the journey this entrepreneur is about to take in preparing to turn over decades of relationships that have become more like family members than clients. This advisor has attended clients’ weddings, birthdays, and funerals and helped them navigate both strong and weak markets along with life’s ups and downs.

To gain insight into the advisor’s emotional state, consider asking the following questions throughout the succession planning process:

  • How are you feeling emotionally about the transition and your impending retirement?
  • What can the team do to ensure you feel we are prepared to take care of your family members (aka, clients)?
  • How can we support you in transitioning into the next phase of your life?

Lastly, rather than seeking to avoid failure in succession planning, flip your mindset to consider how you can achieve success. Care for the retiring advisor, care for his clients, and care for the emotions involved (because even if they’re not immediately apparent, I assure you they are there).

I hope the steps I’ve outlined above can help you build a strong foundation – whether you are acquiring a practice or preparing for the next phase of your journey.

Should you need any assistance in setting a succession plan in motion through the lens of success, feel free to contact us here at Janus Henderson so we can support you and your team in making a smooth transition.

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