Advisers, have you planned your succession?

If you promise excellent service for a lifetime, do you mean their lifetime or yours?
By Guest |  11-11-19 | 
 
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Morningstar invites thought leaders from the investment community to share their insights. Views expressed are personal and should not be construed as investment advice.

Your succession plan is on the minds of your clients. Discussing it with them can enhance trust, demonstrate your commitment to them, and deepen your relationships. And you owe it to them to have one.

Succession came up in advisory board meetings I conducted this month. One was the first meeting of a new board. Most of the meeting was spent on the foundational questions we put on a first agenda: why board members chose to work with the firm, what they found most valuable in how the firm provided their services, that kind of thing. And, as we will often do at the end of the meeting, we asked the group what the principals of the firm should consider when updating their strategic plan for the next year. Several board members mentioned having a current succession plan and asked that the firm communicate it to clients.

The partners were surprised by the question and that surprised me. Here is a firm owned by septuagenarians writing estate plans for clients. If you are over the age of 60 your clients have it in the back of their minds as well. Especially if they are younger than you. Maintaining and communicating your succession plan can help provide that peace of mind many advisers want to deliver. More than that, it is a concrete demonstration of your commitment to take care of them.

If you promise excellent service for a lifetime, do you mean their lifetime or yours?

The financial plans you write have a risk management component to them. That portion of the plan effectively says here’s how we are going to take care of the people you care about if anything happens to you. Your continuity plan is a way of saying here’s how I’m going to take care of the people I care about if anything happens to me. And your succession plan is a way of saying here’s how I am going to take care of the people I care about when something happens to me, including if that something is wanting to transition into the stage of life you and I have been planning for you.

Communicating that plan is a relationship-building opportunity. The idea of communicating a succession plan freaks out a lot of advisers I speak to, especially the ones who are planning an external succession. If you will indulge the hyperbole, the fear that “if I tell my clients I may sell my practice someday they will all immediately leave” is similar to the fear that “one of my board members may say something negative and then all of the board members will go find other advisers.” Neither is true. Succession is a sensitive issue and needs to be handled thoughtfully. When we have addressed it in advisory board meetings it has been a positive experience for both clients and advisers.

Which brings us to the other succession discussion we had with a client advisory board this month. The firm is exploring an external succession strategy, believing it may be the best option. And so we asked the client advisory board what characteristics would be most important to them in the firms they consider. The clients communicated aspects of the relationship they considered important that had not come out before when we asked them what was most valuable about the service they receive. We got good guidance on what to incorporate in a succession plan, how best to communicate a merger in the future, and gained insights into what those clients valued most. It was a productive conversation.

You owe it to your clients to have a plan for addressing their needs beyond when you are able to provide it to them personally. Involving them in the development of that plan is good for both of you.

This post by Stephen Wershing was first published on The Client Driven Practice.

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