One of the hardest decisions for a business leader to make is when to exit. This is also one of the most important decisions. This choice informs every other aspect of management, from the people hired to firm branding to client relationships. It also directly impacts the leader and those who depend on him.
The longer one waits to implement an exit plan, the harder it becomes to create the right infrastructure for an orderly transition, let alone a forced transition in the unfortunate event of death or disability.
Lately we are hearing from more 60- and 70-year-olds who are struggling with the question of when and how to exit. While objective observers may view these individuals as closing in on the end of their careers, many veterans see a more youthful reflection in the mirror. They seem to believe that the half-life of a financial advisor is greater than that of any other profession.
The pattern of excuses is common: “I plan to work until I can’t.” “I will make more money if I keep working than if I sell this business.” “There’s nobody in my firm who can do what I can do.” “I like what I do; why should I stop?” “If somebody else takes over, I don’t trust them to do right by me.”
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While valid sentiments, these arguments seem out of harmony with the way most advisors live their lives and serve their clients. By dint of their profession, advisors often challenge others to face reality and make hard decisions.
In my experience, financial services professionals fail to execute on transition plans for six core reasons:
Lack of vision
Lack of time
Lack of commitment
Lack of context
Lack of courage
Lack of consideration
Lack of vision. It is hard to take charge of your destiny when you have no clue what your destiny looks like. This business tends to define people, both their self-image and how they are seen in their community. As a result, many firm leaders find it difficult to imagine a life beyond the business, whether a life of leisurely retirement or an encore professional life doing some other type of meaningful work.
Lack of time. This business also tends to consume every waking moment of the people working in it. Very few advisors take time for reflection and contemplation. With no effort spent thinking about the future or executing on a transition plan, there should be no expectation of a fulfilling outcome.
Lack of commitment. When you love something or someone, it is quite easy to make a commitment. When you have an aversion to something, you tend to avoid it. Most people find thinking about their exit both distasteful and scary. I rarely hear leaders say how much they are looking forward to the end of their career. The absence of passion and incentive begets the absence of commitment to an exit plan.
Lack of context. Proper perspective aids all big decisions. Because it seems so final, business leaders often view the decision to retire or sell their business as an all-or-nothing, black-and-white choice. Leaders often fail to realize that binding agreements can control many aspects of a transition, enabling them to customize exit plans, including their wishes to keep working, stay involved with clients or be recognized as a continuing part of the business. Leaders can even arrange for continuing income.