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What Role Does Technology Play In Your Succession Plan?

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Editor’s Note: Dan Skiles is one of our 2014 IA 25 honorees. Read his profile from the May issue of Investment Advisor here, and look for his extended profile on on May 13.

Succession planning: Without a doubt, this is one of the most important topics for our profession. Attend any conference or workshop and the succession planning session is often standing-room-only. There are a number of important variables that factor into any succession plan, but it should come as no surprise that your firm’s technology is one of the most important.

The first question to ask is what products or systems your firm actually owns versus systems that you rent or that others provide to you. For truly independent firms, chances are you own all your technology. The role of these systems in the valuation of your firm varies depending on other factors that you may or may not be able to change, such as where your accounts are held, the various investments that you implement, the ease of exporting the data and the types of clients you serve.

For advisors whose technology is owned by their broker-dealer or custodian, it is very important to understand the technology systems and underlying data that you can take with you. For example, if your performance reports are provided exclusively by your BD or on a system that is not widely available, this could create an issue when you decide to leave.

Every firm should understand which systems and processes are critical to their business. Examples of critical systems could include your CRM system, performance reporting programs, and trading and rebalancing systems. Critical processes might include how you implement and monitor investment recommendations. Regarding succession planning, technology systems and processes that are deemed critical should be relatively easy to transition or convert for use in another firm or business environment. It is even better when your critical technology systems are also widely used by other firms. It is certainly easier for two firms to merge (from a technology perspective) when they share common systems and processes.

Another area to consider is the amount of customization in your systems. Often, advisors are very proud of the customization developed by their firm, and justly so, since it is most often done to better serve their clients. It is important to understand whether this customization will be valuable to other firms, though. If it is easily transferable, it could certainly be considered an asset. However, in some cases customization could easily become a liability, such as when the customization requires maintenance and upgrading. No firm wants to merge with one that has technology problems that are challenging to correct, which can often be the case with undocumented or inefficient customization.

Sometimes a firm’s succession planning moves to the “front burner” because one or two of the principals are not interested in working as much as they have in the past. If your firm’s technology doesn’t facilitate remote employees, then these lifestyle requests can become an issue. If your succession plan is one that entails you working at your firm beyond traditional retirement but not at the same level of hours, it is important to ensure your technology will offer this flexibility. Even with reduced management and direct client responsibilities, utilizing technology solutions that will allow you to operate where and when you choose will be very important.

If you undertake some advanced preparation, the technology utilized by your firm should be a positive factor in your succession plan. Furthermore, it is easy to make the argument that a firm’s value increases when the technology it leverages improves the firm’s productivity and the client experience. There is no shortage of good reasons to get the technology component of your succession plan in the best condition possible.


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