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Practice Management > Succession Planning

In Succession Planning, Do Advisors Practice What We Preach?

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Financial advisors know the importance of succession planning for their clients. Foundational to completing a financial plan for any business owner is an in-depth conversation about succession management: Business continuation plans and buy-sell agreements need to be implemented and funded. But what about the financial advisor’s practice? Do we as an industry practice what we preach?

The UNIFI Companies have distribution partners who offer succession management stories from practices that span generations of service. Here, we look at two of these businesses–a family-centric operation and a mentor/apprentice practice–and explore the insights we can glean from them.

A family affair

When R. David Wentz founded Tax Favored Benefits in 1980, he had no idea of the organization it would grow to become. Headquartered in Overland Park, Kan., the firm specializes in retirement plans, employee benefit programs, risk management and investments. Today it has more than 700 corporate clients, thousands of individual clients, 8 in-house producers and 30 support staff associates.

Family members at the firm include R. David’s son David B. Wentz, daughter Audrey Wentz Chinnock and sister Cynthia Richter. There are many non-family key executives as well, and several successful young producers who joined the firm have become an integral part of the organization.

With such a dynamic team, R. David was confident his clients would be taken care of when he was absent from the office and when he died, retired or became disabled. So for several years he did not completely address the issue of succession planning.

It was his children who finally triggered the topic; David B. and Audrey needed to know more specifically what the plan was if their father passed away. So 5 years ago, the family members started with internal discussions, which then led 3 years ago to more formal planning.

They used an outside consultant, who spent approximately 8 days over two years with the family and various staff members; they also attended seminars. Today, the organization has a written succession plan that is part of the estate plan and is funded with life insurance. It consists of various milestones and continues to be a work-in-progress.

When David B. and Audrey joined the company, R. David thought it was critical they spend their first years building up their own book of business. But for succession planning, different activities were necessary. For Audrey, learning the HR and internal operations side of the business was a milestone in her preparation. David B. took over management of the sales force several years ago. Additional key milestones have been defining their roles as chief operating officer and president.

This has allowed R. David to greatly reduce his involvement in business operations. David B. now handles marketing operations and Audrey handles the day-to-day operations. Cynthia oversees the plan administration side of the business and Executive Vice President Bill Stapp is integral in business negotiations. Additional management duties have been delegated to the director of finance and office manager.

That doesn’t mean R. David doesn’t stay busy. He is still ultimately involved and maintains an intense client appointment schedule. His goal is to gradually diminish his involvement each year over the next 4 years, when he will reach his desired retirement age and will only devote time to certain clients. To that end, the leadership team meets regularly and the written succession plan is reviewed each year.

If you are considering a succession plan for your organization, Wentz’s recommendations are:

–Start sooner rather than later.

–Begin discussions as soon as it is an issue.

–Begin the process of a more formalized business operation with greater delegation early.

–Bring in a third party/consultant to help guide the discussions.

–Try not to discuss business at family gatherings.

A mentor and his apprentice

Manuel “Manny” Martinez answered a blind ad in 1976 when he was fresh out of college and unemployment in southern California was 14%. He joined Lincoln National, who supplied him with leads and taught him the planning process. In his first year in the business he won the high Career Club award; and what he originally thought was a short-term stopover in his career became a lifelong passion.

Manny continued to practice holistic planning and built an impressive practice. His clients are typically business owners with annual incomes of $300,000 to $2 million and whose needs include tax planning, deferred compensation, charitable gifting and other areas.

Then at age 45, Manny had a jolting wake-up call: His appendix burst and he almost died. At that point he had no succession plan or any immediate prospects to bring into the business. It made him recognize the need to have a backup plan for his clients.

Shortly thereafter, attending a client’s daughter’s wedding, Manny met Kenny Winter. Kenny, the son of another client, was a recent finance graduate and was beginning to explore career opportunities. Manny was immediately impressed with Kenny’s moral fiber and within a week, they had sealed the deal for Kenny to move to Southern California and join Manny’s agency.

Manny established an apprentice program that more closely resembled a junior accountant or law firm structure than the typical insurance or financial planning system. Kenny joined him in every client meeting, taking copious notes and learning Manny’s relationship-focused planning style. From day one, Manny shared a percentage of every case with Kenny, a rare occurrence in this industry. Manny believes that you have to provide a decent living to recruits you are cultivating so they can focus on developing their own expertise. Each year as Kenny assumed more responsibility, the percentage increased.

Today, Kenny is an integral part of The Martinez Agency. He and Manny still meet every new client together as a team and Kenny has developed specialized expertise in business organization structure and tax planning. When the phone rings in the agency, 6 out of 10 calls are for Kenny, which gives Manny peace of mind that his clients would be in good hands if he were absent from the agency.

Manny’s goal is to eventually slow down, transition out and transfer the general agency to Kenny. There is a written plan in place to accomplish this goal, but Manny admits they need to review it more often.

Not that Manny has any immediate plans to retire. At 58, he is going strong, the agency is growing and he still has plenty to teach. In fact, business is growing so well, they added staff and a second apprentice has joined the agency and will be nurtured and mentored in the same fashion as Kenny.

Don’t delay

These two businesses couldn’t be more different in terms of size and structure, but they do share a passion for their work, respect in the industry, and an ongoing commitment to their clients. One of these models may be right for your practice, or maybe a hybrid. Whichever is the case, the primary lesson I learned is don’t delay this important work. These individuals had the foresight to plan accordingly and so can you.

Linda Glantz Murray is second vice president, product marketing, UNIFI Companies. You can e-mail her at .