Succession Planning : The Next Generation of Ownership

Yes, it’s true, you can work forever.

Recently, the career of “financial planner” has appeared on many Top 10 career lists. This is due to high job satisfaction and earning potential in the industry. It comes as no surprise to veteran advisors, who have first-hand experience of the financial and emotional rewards that come with helping clients achieve their financial goals. This reason is only one of several why many advisors desire to work as long as possible, and why so many fail to plan for their own retirement or succession.

Failure to plan can have severe effects on your personal wealth, and thus your lifestyle. According to extensive data we’ve collected, financial advising firms with stagnant growth rates share two common attributes: they are single-owner businesses where the principal advisor is over 60. Growth rates that don’t grow inevitably lead to a decline in revenue, and eventually decreasing business value. However, with proper succession planning, you can work for as long as you desire without diminishing your income.

Create a plan to transition ownership to a new generation of advisors gradually and in small amounts (as low as 5%) that increase over time. By proceeding slowly, you, as the founder, retain control over business decisions, while testing out the next generation of owners. Giving the second generation a chance to build equity in your company encourages them to think like an owner, and invests them in the success of your practice. Over time, you may continue to work as long as he or she desires, while the next generation takes on increasing responsibility for the growth of the practice.

The catch here, though, is that a plan has to be put in place early enough to allow the time for a gradual implementation. By starting early you can preserve your income by perpetuating your business as well as protect your retirement and succession options.