“We see it as a process, not a triggering event; not something that just happens and then it’s all done,” Richard Dragotta, a branch manager for LPL Financial, said of succession planning. “Most folks start thinking about it too late, as an event happens.”
“What they don’t realize is the smarter or more successful succession plans have been thought about” for some time, he told ThinkAdvisor on Friday. “Retention is the key to succession. In terms of making that succession planning apparent to your clients, the introductions, the subtleties and the discussions about that need to happen as rapport is built over many years.”
That means that “the guys that decide to retire and say, ‘I’ve figured out who’s a successor’ and one month later they’re gone, the success of that succession plan is going to be poor,” Dragotta said.
The succession planning process begins with “first coming to the conclusion and buying into the idea that the inevitable is going to happen,” Dragotta said. Whether it’s a voluntary retirement or due to a disability, eventually everyone stops working.
However, once advisors accept the inevitable, they can plan for it in a way that they’ll be satisfied with the outcome.
“Some advisors want to slowly sell and stay involved,” Dragotta said. “Others want completely out, so you have to have a sit-down with yourself or with your other partners.”
Dragotta expects many advisors will opt to stay involved in some way with the business they’ve worked so hard to build.
“I think most advisors believe it’s a finale, and for some of them that may be the case,” he said. “What I find is that if you have a great practice and you love what you’re doing — which, most of the advisors that are still in the business at the ages that they are, they must love what they’re doing — that it doesn’t have to be that.”
He continued, “There’s a way that you can monetize your business so that you and your family or your beneficiaries [can benefit] without having to completely leave it.”