Succession Planning: Pass It Forward

For the last 35 years, your identity has been wrapped up in being the head of this firm. If you have concerns about losing your identity, staying involved to a lesser degree could help you make this transition more easily. You might discuss with your successor whether you can keep an office at the firm and come in one or two days a week.

I would add: After you've tried this for a while, you'll know if you've achieved the right blend of semi-retirement with partial connection to your work identity. It might also be helpful to ask your wife whether the life balance you are practicing is working for the family.

Q: I'm a sole practitioner who has loved serving clients all these years. I don't want to sell my business to anybody; I'd rather die with my boots on. What's wrong with working till I drop?

DeVoe: I hear you saying you're a dedicated advisor committed to your clients. Are you prepared for the last message they receive from you to be "Your advisor has expired; you're on your own!"?

It's important to let your clients know in advance what their future might hold once you are no longer around. At a minimum, you need to have a very short list of other advisors whose philosophy and level of service match your own. Ideally, you should have a written agreement with them so that if something happens to you, they will service your clients.

Q: I feel great about the planned merger of my practice with another firm. The other CEO will take over running the combined business next year. How do we make this big change go well for my employees, as well as the rest of the staff in our newly merged organization?

DeVoe: You may want to consider working with your staff to help them get smart about the nuts and bolts of this process. For example, there's often a difference in leadership style between the current head of an organization and the person coming in, and different cultures among the two staffs.

Here's an example of how to facilitate this transition well. Two years ago Tim Kochis, the head of Aspiriant, a wealth management firm, told his staff that he was planning to find a CEO successor and move into the chairman role. He merged his firm with Quintile, another wealth management firm headed by Rob Francais.

When they merged, they created a succession plan for Tim, and Rob moved into the CEO role. As part of that, Tim took a six-month sabbatical, creating the space for Rob to transition into his new leadership role. The staff didn't have to wring its hands wondering which of the two was in control. Both Tim and Rob believe in sharing information with their staff as soon as possible, telegraphing what will happen next for the organization.

So we're seeing two best practices in this example: first, starting the planning process as early as possible; and second, keeping your staff in the loop so they understand what will happen. Keeping people up to date helps them understand what their role may be in the new organization over the long term. This helps create a culture that will give them higher satisfaction over time.

Q: I have mixed feelings about whether anyone on my staff has the ability to assume ownership. I'm contemplating looking outside for a successor, but how do I know if that's a good idea?

DeVoe: Each of the three successor options–internal, external, and transaction–has its advantages. An internal successor is going to be someone who fits seamlessly within your company's culture, but may not have all of the skills on your wish list. On the other hand, the benefit of an external successor is that you get to hand-pick the skills and can focus on the cultural implications instead. With a transaction, whether it's merging into a bigger firm or partnering with a third-party consolidator like Focus Financial Partners or Fiduciary Network, you can be even more selective about the capabilities you want to augment for your firm, such as investment management, relationship management, and leadership skills.

My conclusion: All of us have a human need to leave a legacy. The sooner you can gently turn your mind toward thinking about this and making solid plans, the better you'll feel about the trajectory of your professional life.

Olivia Mellan, a speaker, coach, and business consultant, is the author with Sherry Christie of The Client Connection: How Advisors Can Build Bridges That Last, available through the Investment Advisor Bookstore at www.investstore.com/investmentadvisor. She also offers money psychology teleclasses for financial advisors and for the general public. E-mail Olivia at [email protected].