Common pitfalls when dealing with succession planning for financial advisers

As a successful financial adviser, you’ve worked hard over the years to build up your business and nurture your client relationships.  Your own retirement will one day be on your horizon, or you may even be looking to reduce your hours at this point. This is where a strategic succession plan is needed to protect you, ensure the sustainability of your business, as well as consider the wellbeing of your clients.

What to look out for as a financial adviser?

Financial services can be complex, and your plan should therefore identify the strengths and weaknesses of the adviser or advisers taking over your business. For example, are they skilled in compliance and regulatory matters, or do you need to outsource certain functions? Do they align with the culture of your practice, and will they service your clients in the same way that you do?

Considering these factors upfront will go a long way in ensuring stability, which also has a bearing on the value of your business. Here are some common pitfalls we see when assisting our financial advisers with their succession planning:

1. Starting too late: Putting off the process of succession planning is perhaps the most dangerous mistake of all. This could lead to rushed decision-making if done in a hurry, or decision making when you no longer have the capacity to do so.
2. Misaligning your personal and professional goals: A common error when setting up your succession plan is neglecting to focus on your own personal goals as part of it. We see many advisers wanting to reduce their hours, but at the same time wanting to keep full control of the business and not release any equity. It’s understandable that you may want to retain control after having built up the business, but there’s always the risk that a younger adviser who has built up relationships with your clients could leave and set up their own practice, and some of your clients may join the new practice. This could lead to a breakdown in the relationship, and you may even have to start the succession planning process from scratch.
3. Avoiding the ‘one-size-fits-all’ mindset: The needs of all parties, including your clients, need to be considered and a plan crafted accordingly. For example, if an adviser has the proceeds to buy your business, that takes care of you and your family. But what about your clients? Will they be looked after and serviced in the same way?
4. Not communicating enough with everyone involved: A smooth transition in leadership will also lead to continued service excellence for clients and minimal disruption for them. It’s important to communicate with your clients throughout the process, keeping them up to date, and advising them of who to contact in need.

Building your legacy through a thoughtful succession plan

Succession planning is a key part of Graviton’s offering – for both advisers wanting to sell, and those wanting to buy, an adviser practice. We have a network of advisers, which means you can meet like-minded individuals who like to work in the same way that you do, making it easier to agree on terms for the continuation of your business.

In addition to helping structure the plan and matching potential advisers, we also provide the governance and necessary legal and regulatory support to support the plan. Graviton can guide you on the valuation of your business and in mediating between the parties to reach agreement on the terms and conditions. We can also assist you in obtaining the necessary funding, if required.

Ultimately, succession planning is about safeguarding your life’s work and providing a seamless experience for your clients, who rely on you for financial guidance. You have plans in place for your business as well as your own personal financial plan for you and your family. Succession planning brings it all together. Don’t overlook this vital aspect to ensure the continuation of your business, your own financial success and the wellbeing of your clients.

Contact us for more information on this topic.