Three keys to succession planning

Advisers need a safety net that can be modified as circumstances change

Dec 15, 2017 @ 12:42 pm

By Todd Fulks

The advisory profession is a noble one, wherein participants are entrusted with the important responsibility of helping clients to accumulate wealth, plan for the future and retire comfortably.

However, the industry is at an inflection point. According to Cerulli Associates, the average adviser age is now 51, and 27% of advisers plan to retire within 10 years. One Fidelity survey conducted in 2016 also indicated that the DOL rule may cause 10% of advisers to leave or retire from the field earlier than planned — while 18% are considering a change of career altogether.

As the advisory profession enters an era of change, here are three major factors that advisers should bear in mind when executing a successful succession plan or business acquisition.


Anyone who has ever worked to sell their business or compile a succession plan tends to have a key priority: finding the right person to take over the crucial relationships that represent the bedrock of their business.

As their adviser, clients have entrusted you with their financial security, and it's important to make sure these clients can feel confident that your successor will provide the same levels of care, compassion and detail-oriented service that you've provided for so many years.

Both the buyer and the seller of a business need to understand that finding the right match is far more important than the money involved in the deal.


Most successful succession plans are coordinated over a number of years, which means that you must take diligent steps to build a business that will be attractive to a successor in the future. Here are a few tips for advisers as to how they can navigate the process efficiently:

1. Build a business with more recurring revenue than non-recurring revenue. For instance, build your business on an advisory platform. This not only creates a more valuable business model, but businesses that embrace this model tend to have a stickier client base.

2. Clearly outline your succession goals, then work toward them. Most business owners are looking for a slow, internal transition. However, for a business owner to accomplish this, they'd typically need to begin working towards this goal 10 years or more in advance of retirement. Take the time to literally write out what your goals are, and even what you plan to do after you retire.

3. Understand valuation and deal terms. Educate yourself on market conditions and how you can apply that knowledge to your particular circumstances. You can use the market as a benchmark and a point of reference to help guide you through the process. Speak with those who have bought or sold a business, and work with qualified professionals who can help you prepare for what your succession plan will look like.


One often-overlooked, but critical, facet of business ownership is continuity planning. As a small business owner and a financial adviser, you should protect your business against the potential impact of unforeseen events — including the death or disability of key personnel.

(More: Retirement plan advisers need to start planning for their own succession.)

The implementation of a robust continuity plan isn't just good business savvy. Various regulatory bodies, including the SEC and state securities regulators, have begun to mandate the implementation of a written continuity plan.

In 2016, the SEC doubled down by proposing Rule 206(4)-4, which could require RIAs to not only demonstrate a continuity plan commensurate with their specific operations, but also implement firm policies and procedures relating to business transition.

You don't need to over-engineer this plan — it should be a safety net that can always be modified as circumstances change. As a financial adviser who maintains sensitive information and provides financial advice, it's even more important that you practice what you preach and adhere to the rules outlined therein — you owe it to your family, your staff and your clients.

Understanding these core tenets and best practices will help both buyers and sellers navigate the tricky waters of succession planning to prepare for a smooth transition, and profitable succession, that ensures clients continue to receive the type of outstanding service they've come to know and appreciate.

Todd Fulks, JD, is SVP of succession and acquisition for the Advisor Group.


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