Succession planning where the adviser keeps working?

'Sell and stay' is a strategy that can help advisers focus on what they care most about doing in later years

Aug 6, 2019 @ 10:07 am

By Scott Hanson

We financial advisers are not a young group.

In fact, with an average age of 49, we're part of one of the oldest workforces of any profession.

With so many principals nearing retirement, more's being written about succession planning: Simply, established advisers need a plan to replace themselves once they retire, die or become disabled.

There's another path for advisers that's recently gained a lot of momentum, and that's where smaller shops merge with larger firms for both growth and a better quality of life — and all while providing a better experience for the client.

Sometimes called "sell and stay," this is the process where an adviser sells but continues working.

Given the right circumstances, my experience has been that this route offers some attractive possibilities.

For instance, larger firms can provide greater autonomy. This might sound counterintuitive, but just stop and consider all the commitments advisers face on a monthly basis. How many of those obligations bring passion and personal growth?

(More:Advisory firm founder carries half his clients' fees into retirement)

If you've been at this for a couple of decades, my guess is that 80% of what you're doing is rote and routine and only about 20% really gets your juices flowing.

If you merge your practice with a larger firm, you can free yourself up from the mundane and do more of what motivates and inspires you. Maybe that's meeting with your long-time clients, or maybe it's being involved in M&A and vetting firms that might also be good future partners, or perhaps it's just being able to take an extended vacation or sabbatical.

A sabbatical?

The #1 complaint clients have about their adviser is that he or she is hard to get ahold of. In fact, a recent study showed that a full 66% of baby boomers said they'd fire their adviser if he or she didn't promptly return their call.

That means, for the successful independent adviser, even vacations aren't vacations, anymore.

If you're independent, once you've grown your firm about as big as it's going to get; the workload never really decreases.

The firm is maxed and the responsibilities unyielding. Where do you go from there?

Now, as part of a larger organization, where there are other people to help pick up the slack, you can be relieved of almost everything except for what you love and want to do. And from a client's perspective, where attention and response time are key, being served by a larger team ensures those needs are met.

(More: How employee stock ownership becomes a succession plan)

Granted, not all larger organizations get customer service close to right, but a few larger firms are quite skilled at providing institutional level services while maintaining the feel of a private office.

Because I've been running a firm for almost three decades, I've become a student of succession planning. And, I've discovered that, while almost every adviser realizes they need a succession plan, not nearly enough of us understand that merging with the right type of larger firm could provide you with the best succession plan of all.

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with over $4 billion in AUM.


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