Succession Planning

Succession planning's not about you

The ultimate goal is to build a business that can be monetized and transferred

Nov 4, 2012 @ 12:01 am

For several years, research has pinpointed succession as a potential trouble spot for an aging advisory business. But retirement is not the only problematic succession issue, and maybe not even the most important one. Our inaugural study on the topic — the 2012 IN Adviser Solutions Study on Succession Planning — highlights two critical insights largely missing from the discussion, until now:

• Succession planning is about creating a framework for the sustainability of the business and the transfer of ownership, not simply planning for some kind of terminal event — like a retirement or exit from the business.

• Successful firms excel at a wide range of practices that build transferable business value — that is, they are especially good at the “planning” part of succession planning.

Study results suggest that advisers and industry analysts who view succession planning exclusively through the lens of retirement, or exit, are taking too narrow an approach.

The idea that succession planning is part of a broad range of strategic activities fits with previous study data about what drives success. In several different studies, we identified a “top performer” group and correlated their success to high performance across a wide range of practices. That is, successful firms tend to excel at a cluster of best practices, while firms that lag the competition score lower across the same range of factors.

Just as in previous reports, the 2012 IN Adviser Solutions Study on Succession Planning reveals that successful firms report higher relative performance across a range of planning measures. Interestingly, those measures were not exclusive to succession. They included many strategic business and human-capital development activities, such as documenting a strategic plan, communicating that plan to employees, documenting job descriptions and creating career paths for employees.

I recently interviewed an adviser whose firm has been expanding its ownership for approximately two decades; he put it this way: “Succession planning — just the very term suggests that it's about you and about you individually. The fact is, the whole exercise should be about doing what's best for your clients and your business and protecting all constituencies — your clients, your employees, your owners, everybody.”

In other words, succession planning is not about you.

Indeed, the ultimate “succession” goal is to create transferable value so you can monetize the business you have built. The transferability of value, in turn, depends on the strength of the firm's operational processes, the skills and capabilities of the staff, and their ability to achieve the firm's strategic mission — independently from the founder(s) or current owner(s). You must demonstrate not only that your business is productive, profitable and growing, but also that it can continue to function successfully after you depart.


For the same reasons, it should be no surprise that continuity and legacy are sellers' top priorities: Firms that have executed an ownership transition plan cite as their most important success factor “continuing the legacy and reputation of the firm.”

In addition, advisers who are selling ownership report that they want to stay in the business long enough to ensure the firm's continued success. “Exiting over time” is much more important for firms that have already completed an ownership transition, compared with firms that are just in the planning phase.

So, advisers thinking about succession would do well to heed the data: Of those firms that have executed a transition plan, 81% report having a documented strategic plan, compared with just 45% of firms whose succession plan “needs refinement” and a mere 15% of firms that have no succession plan whatsoever.

Well-prepared firms embrace the “planning” aspect of succession planning — in human-capital development as well as operational sustainability (e.g., productivity, efficiency, profitability and growth). These firms interpret their succession mandate very broadly. For them, the goal is institutionalizing a wide range of business practices to create sellable value. It is rarely, if ever, seen as just transaction planning for a single, terminal event.

Kelli Cruz is the director of research and consulting for IN Adviser Solutions. Visit to order a copy of the 2012 IN Adviser Solutions Study on Succession Planning.


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30


Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video


Why broker-dealers are on a roll

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss last year's bounce-back for IBDs.

Latest news & opinion

Things are looking up: IBDs soared in 2017

With revenue up, interest rates rising and regulation easing, IBDs are soaring.

SEC advice rule may give RIAs leg up over broker-dealers

Experts say advisers will be able to point to their role as fiduciaries as a differentiator in the advice market.

Brokers accept proposed SEC rule on who can call themselves an adviser

Some say the rule will clear up investor confusion, but others say the SEC didn't go far enough.

SEC advice rule: Here's what you need to know

We sifted through the nearly 1,000-page proposal and picked out some of the most important points.

Cadaret Grant acquired by private-equity-backed Atria

75-year-old owner Arthur Grant positions the IBD for the 'next 33 years.'


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print