Succession planning is top of mind these days with many advisory firms and the good news is we’ve seen many actual transitions to the next generation of advisors taking place, among our clients and in other firms. However, in our experience, perhaps the biggest challenge that successions face is a phase of what I call ‘disillusionment’—when everyone gets ‘disconnected’ from the ultimate goal.
This often happens when there is a shakeup in management or when discussions turn to the ‘deal’ for the transition (money issues). The good news is that if a firm can make it through the disillusionment stage, then it’s downhill from there on out. The danger is that some owner advisors get stuck in disillusionment—get angry, mad, disconnected—and ultimately lose confidence in their team and in the idea of a succession.
When these issues get to a breaking point, it’s the owner’s job to step up and be the leader. During succession planning, being the leader becomes the central part of making the deal work. Many owners vastly underestimate how much time this process takes. We’ve found that the best way to do this is to make their intentions and goals very central and clear. In our experience, the most successful vehicle for this is a letter—a very personal and direct letter—to the potential partners that express the owner’s deepest concerns, thoughts and feelings, and set some boundaries around what the goal is and the intentions of the succession.