Succession Planning: Tips to Finding the Right Successor

Preparing for a cohesive legacy is not as simple as it may appear. Our recent survey, in partnership with the Financial Planning Association and Knowledge Labs®, examined how financial professionals are approaching succession planning, and if they aren’t, to define their hurdles.

As a result, 51% of financial professionals reported that finding the right successor to their business is their top reason for hesitating to create a succession plan. A staggering 74% of financial professionals stated that while their business may be ready for transition, they’re not sure they’re quite ready to retire. Other respondents worried that the business they spent their careers developing won’t be as successful if they’re not there.

I have to echo these sentiments. After years of consulting to financial professionals it’s clear that the planning process is as important as the end result, but just as important is the reality of whether you’re actually ready for the next chapter. Below are questions you can ask yourself—and your potential successor—to help you plan the future of your business.

1. What questions should you ask yourself?

  • What do you want to do next? How would you relinquish control of the practice? Do you even want to retire? What is the cost of not retiring? Much like helping a client’s retirement plan, you need to determine your goals.

I was recently working with a financial professional in Cleveland whose father-in-law owned their practice and planned to transition it to him. In this case, the team had a succession plan in place, but it turns out the supposedly retiring financial professional didn’t want to leave. So the plan became essentially meaningless. When it comes to succession, the planning process may be useless if it does not address your needs.

2. What questions should you ask the successor?

  • What are the key motivators for the candidate and this new partnership? Are they aligned with your motivations, and most importantly, do they suit the needs of your clients?
  • Does the potential successor bring unique strengths and interests? How can that contribute to the growth of your business?
  • Do they share the same core values in terms of running a professional practice? Is that aligned with the rest of the team members?
  • What are the specific goals for the practice in year one and following? Do you share the same long-term vision?
  • What new ideas do they have for processes, modification to how the practice currently operates and thoughts on how to gain adoption by others on the team?
  • What is their portfolio management philosophy?

In the end, the longer you wait, the less access you may end up having in determining the nuances of your legacy. But you can maximize the odds of success by planning early-and strategically. And don’t be afraid to ask yourself and your partners the tough questions that will ensure the business you worked long and hard for continues to best serve your clients and your future.