I got the following e-mail in response from to my June Investment Advisor column, “The 6-week Solution to Succession Planning.”
“Read your June article about hiring younger planner for succession planning purposes,” it said. “Makes sense in some ways, and I like the 6-week training plan. But what is the likelihood that these young folks can afford to buy you out in 5 or 10 years?”
While my column was mostly about creating a better process for retaining young advisors in advisory firms—which is a good thing for myriad reasons—there certainly is a succession planning component to ending the revolving-door syndrome. The subject of how to build a successful succession plan could fill volumes (and firms such as FP Transitions have built entire businesses around succession programs such as their Equity Management System). Yet, in my work, I’ve found that there are a few basic principles that all such succession programs should include to maximize their chances of success.
To start with, like most folks who offer advice about succession planning, I can’t overemphasize the importance of a long enough time horizon: you simply can’t identify a potential successor, groom them to run your firm, prepare your clients to accept them, and grow the practice to buy you out, all in a couple of years. We’re looking at a ten-year project and longer, here.