From the January 2009 issue of Boomer Market Advisor • Subscribe!

What's getting in the way of your succession plan?

A Tiburon Strategic Advisors study found that 51 percent of all independent advisors are over age 50 and half of them intend to sell their businesses upon retirement. According to the same study, only 45 percent of fee-only financial advisors and 29 percent of independent advisors had written succession plans.

What's that about?

Financial advisors are smart people. They work with clients who have not adequately planned for the future and ensure that a plan is created. Yet advisors typically don't have an agreement in place to transition their biggest asset -- their own business.

What are your excuses for not having a succession plan? Here are some common delay tactics:

  • It's no fun. Everyone avoids thinking about aging and death. Clearly, advisors are not exempt from the emotional resistance to anticipating the inevitable. The reality of approaching the inevitable is so overwhelmingly negative that some advisors invent reasons why they cannot create a succession agreement: Lack of information? Lack of support? Lack of knowledge?
  • We have little history of transitioning our businesses. This is the first generation of financial advisors to transition practices. The medical, dental, legal, or accounting industries have transitioned practices for generations -- even centuries. The financial services industry is new, and it has been only in the past one to two decades where they have changed hands. We simply don't have he history, and the guidelines for transitioning financial advisory practices are still being formed.
  • Get as much for it as you can. An advisor tends to see how the practice has evolved over time, whereas the potential successor sees where the practice is at now. It's no surprise that an advisor wants to be compensated as highly as possible for the "sweat equity" that he or she poured into the practice over the years as it grew. But trying to get as much as possible prevents negotiating a deal and accepting an offer.
  • What's next? For many advisors, the practice has absorbed time and energy for decades. Many advisors love their work and helping clients. And, as Mitch Anthony asserts in The New Retirementality, this generation doesn't have to retire simply because it's reached the traditional age when its parents retired. So because advisors aren't thinking in terms of retirement, they fail to address what's next. This, too, prevents them from creating a succession plan.

Whatever your reason or excuse, you owe it to your clients to be prepared in case of physical or mental disability. Articles on succession appear in every journal, seminars are provided at every major conference, vendors on transitioning a business are eager for business. It is unlikely there is a lack of information despite the unique nuances of each deal. Greater than the lack of knowledge may be the emotional resistance to putting a succession plan in place.

If you find yourself without a succession plan, is it because of emotional reasons? Is the lack of progress really due to a lack of knowledge? Or is it due to a powerful anxiety about moving forward? Camouflaging delay tactics as a lack of knowledge is dangerous.

Joni Youngwirth is the managing principal of practice management at Commonwealth Financial Network in Waltham, Mass. She can be reached at

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