Most financial advisors enter the profession with a clear purpose: to help people build more secure and prosperous financial futures. The career is also an opportunity to build something with a lasting impact and unique. But to create a sustainable practice that will endure for generations, advisors must embrace all the facets of running a growing business – from marketing and branding to hiring, compliance, and operational infrastructure. Amid all these priorities, however, one critical responsibility is often put on the back burner: succession planning.
Succession planning has quickly become an urgent issue for our industry. The average age of an advisor has reached 56 and nearly 40% of the advisory workforce is expected to retire over the next 10 years. At the same time, demand for financial advice is soaring and 30% of Americans say they do not feel financially secure.
The stakes for advisors and their clients have never been higher. Yet, succession planning remains an afterthought for many firms, often triggered only when retirement is imminent (which, as it turns out, is not the optimal time to find a successor).
Whether a firm manages $50 million or $5 billion in client assets, building a succession strategy needs to be a priority at least a decade out from retirement – and ideally from day one.
Clients trust advisors with their most personal and important life goals. Waiting until the final years of your career to consider succession means your clients could face abrupt changes at the moment they need stability the most – think retirement, the launch of a new business, the birth of a child, or the death of a loved one. Client loyalty is earned over years of trust, responsiveness, delivery, and consistency. A poorly executed transition can quickly erode that trust and endanger your clients’ goals.
Additionally, those who turn to succession planning late are limited to whichever options happen to be available at that moment. Instead of shaping a transition aligned with your unique vision and values, you may be forced to make a hasty decision that diminishes the value of your business and threatens the legacy you wish to leave behind.
To create a succession plan that protects your clients, preserves your legacy, and maximizes the value of your practice, consider the following strategy:
Advisors who start thinking about succession on day one will be glad they did, but all is not lost if you don’t get to it immediately. A good rule of thumb is to start no later than a decade in advance of retirement. This is essential to safeguard the experience for clients and to ensure you have multiple viable options. By laying the groundwork early, you can create optionality and avoid being forced into an unhappy exit situation.
But once you have put pen to paper and developed a plan, don’t think the job is done. Life happens and personal priorities change. Business goals and timelines shift. Market conditions fluctuate. A successor you identified early on may move in another direction. Just as we encourage clients to conduct annual reviews of their financial plans, you should review and refresh your succession plan annually or anytime there is a major change to the business to ensure it still aligns with your personal and professional goals.
The hardest part of succession planning is finding the right successor. Attracting, retaining, and elevating next-generation advisors today is the key to building the successors of tomorrow and ensuring continuity for your firm and clients.
Assess rising talent in your orbit and identify potential successors early in their careers. Look for individuals who exhibit leadership potential, who truly prioritize client needs, and who align with your culture. Your successor should be prepared not just to inherit a book of business, but to steward client relationships with the same care and conviction as you and your team.
Leverage mentorships and joint-work opportunities to help nurture future successors. Collaborating on client cases gives you an opportunity to observe working styles and assess philosophical fit over time.
Formalize the succession process by creating clear, aspirational career tracks for promising next-generation advisors. Define the core technical proficiencies, client management skills, and leadership traits that are essential to your firm. Then, develop a roadmap for potential successors to achieve them. Consider including markers like achieving CFP® certification, demonstrating proficiency in holistic planning, participating in leadership development programs, and gradually increasing responsibility for client relationships and business development.
As part of this process, create opportunities for emerging advisors to grow. Assign them to increasingly complex cases, involve them in strategic decision-making, and make them visible participants in key client relationships. Encourage them to lead client meetings and build trust directly with clients – long before a handoff occurs. This isn’t just beneficial for future leaders, it also instills confidence in clients when they see that you have a deliberate and thoughtful plan in place for the future.
Successful transitions don't happen in a vacuum. Engaging with the appropriate leaders at your firm well before you plan to retire can be extremely beneficial as you assess the options available and manage all the complexities of ownership transfer. Many firms are working to provide advisors with succession support – from matchmaking to financing. At Northwestern Mutual, for example, we believe succession planning is essential to upholding our core values and our ability to deliver sound financial advice to clients over the full arc of their lives. That’s why we take a data-driven approach to help our offices nationwide identify their succession needs and work closely with local leaders to help match them with and develop the right talent.
The goal is to help advisors preserve the value of what they’ve created and ensure a seamless experience for all stakeholders. If there are no succession strategists available at the organization you represent, consider joining a company that makes it a priority – or tap insights from a third-party consultant.
Delivering on the promise of multi-generational financial security requires more than exceptional client service today – it demands a clear, intentional plan for the future. By embedding succession planning into the DNA of your practice from day one, you not only safeguard your clients’ futures, but you also honor the work and legacy you built over the course of your career. The valuation of practices that financial experts have worked so hard to build could be significant.
And remember, you don’t have to go it alone. Tap into your peer network and your firm’s resources to get support through every phase of your succession journey so you can move onto the next chapter of your life knowing the financial security you worked to build for your clients will be in safe hands.
John Roberts is executive vice president and chief field officer at Northwestern Mutual where he leads the organization responsible for the growth of the company’s exclusive field force of advisors and teams.
Financial services compliance consultant ACA Group told InvestmentNews it had four clients report receiving emails that impersonated David Bottom, the SEC's chief information officer, with smaller firms being targeted.
Financial advisor Derek Wittjohann shares the lessons he learned after leaving a major wirehouse to set up his own practice in the second installment of InvestmentNews' new 'Independence Stories' series.
RIA assets are key for broker-dealers right now.
The former investment advisor misled clients in a decade-long scheme to fund international travel expenses, country club fees, and other personal expenses, according to three government agencies.
News of the nine-person team's defection comes as the Swiss-based wirehouse welcomes a 25-year veteran from Wilmington Trust.
Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.
Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.
