Business owner clients consider succession, but that may not include the family

Business owner clients consider succession, but that may not include the family
Edward Jones report finds that financial advisors are seeing another route.
JUL 10, 2024

American businesses that have been run by successive generations of the same family may become rarer as owners opt for an alternative succession route.

A survey of financial advisors by Edward Jones has found that 72% of business owner clients are not intending to pass their business operations on to a family member with around half saying that business partners are the most likely successors.

The firm says that financial advisors and other trusted counsel should be involved in the succession plan and most FAs who took part in the poll said that successors should be part of the planning too. However, while 90% of respondents have handled at least some aspect of business succession planning, 36% believe clients could be doing more to be prepared.

This includes planning earlier for succession and meeting with advisors more frequently.

“For owners, it can be a complex and emotional process to even consider handing off a business that they have invested energy, time and money into over the years,” said Jesse Abercrombie, CEPA, financial advisor at Edward Jones. “Instead of going at it alone, business owners can and should lean on financial advisors and a team of professionals to provide trusted guidance and an outside perspective at every step of their entrepreneurial journey – including during something as sentimental as succession planning.”

Eight in ten FAs said that discussing business succession plans with clients is important but this is not limited to financial aspects with 61% citing establishing a timeline and milestones for the succession process as important.

Among the biggest challenges during the transition period are maintaining business continuity, financial planning and ensuring adequate resources for the transition, and legal and regulatory complexities.

“Similar to how individual investors manage their personal finances, business owners should engage financial advisors early and often to ensure their succession plan is adaptable and highly strategic,” said Abercrombie. “Working with a financial advisor can help provide business owners with a framework to ensure they’re on the right path to prepare their business for the future.”

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