Succession Planning

Before the storm: Failure to have a viable succession plan no longer an option

Dec 2, 2012 @ 12:01 am

By Ron Carson

Anyone who watched the coverage of Hurricane Sandy couldn't help but be overwhelmed by the scenes of destruction, mayhem and chaos. And that was just the view on television.

Our thoughts go out to those who were in the midst of it, to all those affected and to fellow financial advisers who live and work in the area, as well as to the residents who must sort through the rubble and continue the process of filing insurance claims and assessing the true cost.

Most people prepared for the storm, either by evacuating areas of very high risk or battening down hatches and stockpiling food and water.

Although people were warned that this could be the worst kind of storm, many were caught off guard by its ferocity. Even the best preparation offered little defense.

InvestmentNews, via surveys and articles, has made much of the fact that the vast majority of advisers have no succession plan.

But in a recent survey of the top five things that advisers worry about, succession planning garnered a meager 8%. Marketing and business development came in first at 35%.

Succession planning isn't merely preparing for retirement. It is a thought-out plan to safeguard your business and your clients when you retire or if something happens to you.

Advisers have been warned that not having a succession plan in place puts their business and clients at high risk. It puts their families at high risk.

Not having a plan in place is as negligent as going to the pier to sightsee with one's children as 12-foot waves bear down on the shore, accompanied by 80-mile-an-hour winds.


That fewer than 10% of advisers have a detailed, coherent succession plan is ludicrous. It is a disservice to them, their families, their employees and their clients.

Much like getting ready for a storm that you know will make landfall in a certain location, having a succession plan is vital for the health of your business and that of your clients.

Too many advisers simply assume that a partner or relative will seamlessly transition in and take over. Too many keep procrastinating, thinking that they have plenty of time.

When they do draft a plan, it often is flimsy, consisting of no more than the name of a person to “take over.”

One common misperception is that establishing a succession plan is necessary only when you are nearing retirement or planning to sell your business. This is completely wrong.

A plan is meant to ensure the functionality of your firm and to provide for the seamless continuation of your clients' financial lives. It is very different from planning to sell.

The topic of building a more salable business, one with real enterprise value, is another subject, for another time. In many ways, that type of “business planning” also is an often-overlooked precursor to succession planning.


Advisers actually don't have much time left to get a plan in place, for a few reasons.

First, they could die anytime, in any way.

Nothing in life is guaranteed, except that no one gets out alive. For the same reason people have life insurance, they must have a legal, detailed plan for their businesses before an event alters their world and that of their loved ones.

Second, most baby boomer advisers are nearing or at retirement age.

Whether they leave the business to a trusted family member or partner, or sell to a solid firm whose model they admire, they need to know their options. And their clients deserve to have this move well considered.

Finally, clients are getting smarter and won't tolerate an adviser living day to day, with no concrete arrangement to take care of them in the event that the adviser is taken out of the picture.

Clients will read about the lack of succession plans in our industry — articles such as this one — and will ask their advisers point-blank: “What is your succession plan, and do you have it in writing, and can you please explain it to me in detail, including why it would be in my family's best interests to stay with the firm once you leave?”

That brings me to my final point.

Advisers should look in the mirror and ask themselves if their firm is the one that they would want taking care of their family if they were to die tomorrow. Most of them will say no, if they are being honest.

I asked myself the same question more than 15 years ago, and my answer drove me to rebuild our systems and create a company that I am certain is the best place for my family's money, as well as that of all of Carson Wealth clients.

My suggestion is that advisers immediately wake up from their complacent slumber and get to work on two things: a long-term business plan that takes into account how much longer they want to work and how they want to build their firm, and a legally documented succession plan that will take effect either at retirement or should the unthinkable occur.

The Alliance for Registered Investment Advisors, a group that I belong to, notes: The time to build the ark is before the rain. Advisers can't be over-prepared.

They need to assess their plans for growth and start thinking about how they will transition out of the business. They must do the right things to ensure that clients will receive a consistent caliber of service once they are gone.

Too much is at stake to ignore the warning signs. Advisers have work to do.

Ron Carson is founder and chief executive of Carson Wealth Management Group and founder of the coaching program Peak Advisor Alliance.


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