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Succession planning requires experienced support

Succession planning has many pitfalls. An often-overlooked hazard preventing successful succession planning is not developing a plan early enough. Many RIAs conclude there is simply no need for a transition plan if retirement is still on the distant horizon. However, the lack of an adequate succession plan may lead to continuity risks, which can stifle growth over the long term.

Another blindspot is the need for advisors to expand their definition of succession planning. A strong plan should consider a strategy for vacancies in the short and long term for the firm’s critical business roles. (Source: The 2017 FA Insight Succession Planning Survey.) Regardless of the development stage, there are many advantages for firms that plan ahead—and early.

Succession planning takes time

Succession planning is more than the process of identifying new leaders or potential buy-out strategies. It is often an emotional and vision-driven process that takes years. In fact, three to five years is the estimated time frame. For this reason alone, many founders delay planning. Less than half of firms reported having an adequate plan in place, with 59% reporting plans to retire within 12 years.

The earlier you start planning, the more options you have down the road. Another pitfall in successful succession planning is understanding valuations and seeking specialized advice in assessing a firm’s worth. A clear understanding of the economics of transitioning equity helps RIAs have realistic expectations in potential buy-out opportunities.

Experienced support for Internal or External Succession

Outside consultation helps firms whether they plan for internal or external succession. Succession planning with experienced support also provides greater control for shaping the legacy of the firm. Timing, equity stake, and successor characteristics are three important elements to outline and discuss during strategy meetings. (Source:The 2019 FA Insight Study of Advisory Firms: People and Pay)

Even those succeeding at internal succession planning are most likely doing it with outside help. Consultants who have helped with multiple transitions can keep the process on track by providing objectivity and timelines for the phases of departure. 

There for your Legacy

Sowell Management keeps you on the right path with ongoing support for your firm’s succession planning. The best time to start a plan is now.

BLOG DISCLOSURE: This website blog is published and provided for informational and entertainment purposes only.  The information in the blog constitutes the content creator or guest blogger’s own and it should not be regarded as a description of services provided by Sowell Management. The opinions expressed in the blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry.  The views reflected in the commentary are subject to change at any time without notice.

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