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Practice Management > Building Your Business

Succession Planning in Crisis: When the Dog Catches the Car

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Financial services have been experiencing a succession crisis since the signing of the Buttonwood Agreement of 1792. The industry’s longtime emphasis on managing a “book of business” has created a culture of control and individualism that makes succession planning near impossible. One might have expected that the emergence of the retail RIA and independent contractor brokerage models would have pushed succession strategies to the top of an advisor’s business plan — especially for advisors who work with other business owners as clients!

While not as constrained as those within captive brokerage firms, who claim that clients belong to the institution, independent advisors nevertheless have a death grip on their client relationships. Further, many advisors lack the will to work with or develop others to ensure continuity of the business. These conditions inhibit succession planning and ultimately hurt the transferability of the business.

What evidence do we have of this challenge? Consider these facts: There are nearly 22,000 fewer financial professionals than in 2008, according to a recent Cerulli report on U.S. intermediary distribution, and there are more Certified Financial Planners over the age of 70 than under the age of 30; a mere 23% of CFPs are women, and fewer than 8% are people of color, according to the CFP Board. Meanwhile, the demand for advice from all demographics is increasing, and new accumulators from Gen X, Y and Z are emerging.

Human beings may not be building leverage to serve more clients —but technology platforms, mutual fund companies and discount brokerage firms are. As a result, the greatest risk to the business of financial advice may not be succession at all — but the overall relevance of our profession, should we continue to abdicate the business model to disruptors and well-capitalized corporations rather than invest in the next generation.

This point was brought home recently at the National Capital Chapter of the Financial Planning Association (FPA) annual conference. Eleanor Blayney — an advisor who has played a leading role in building and shaping the financial planning profession — was presented with the Lifetime Achievement Award.

In her acceptance speech, Eleanor shared how she decided that financial planning would be a fulfilling career. Bear in mind, Eleanor has an MA in English lit from Cambridge, plus an MBA from the University of Chicago. While seeking a job in the advisory business, Eleanor was rebuffed by prospective employers for not having enough experience. Even having an MBA was regarded as negative by one industry pioneer who told her, “You MBAs are all alike — you only want to be in this business to make a lot of money.”

Along the way, Eleanor met Greg Sullivan, who was doing financial planning for a broker-dealer. Greg was looking for a junior planner to help him manage the workload. Another local planner referred Eleanor to Greg after deciding not to take a chance on such a novice. After his initial meeting, Greg thought, “Damn, she is smart. I need to find a way to hire her.”

Greg apparently told her he could not afford to pay her what she was making, but the opportunity to work with his firm would be great for her career and eventually would pay off financially. As Eleanor put it, “Greg hired me for my potential not for my experience. I decided to reciprocate that commitment.” After joining Greg’s firm, Eleanor became a CFP to elevate her skills and credentials.

Eventually, Greg left the broker-dealer to form his own RIA, and he took Eleanor and a couple other people with him to create what is now known as Sullivan, Bruyette, Speros & Blayney (SBSB). Obviously, not only did Eleanor demonstrate her potential as a financial planner, she earned the right to become a named partner in a firm that is consistently recognized as one of the top RIAs in the country.

A Legacy Path

Among the reasons SBSB is a leading firm are their depth of staff and the opportunities the partners have created for career growth. Greg and Eleanor learned a lot about the value of hiring right, developing talent and preparing for the inevitable. SBSB now has 14 shareholders and an active program to develop leaders and prepare for the eventual transition of management, clients and other responsibilities.

Meanwhile, upon her retirement from the practice of financial planning, Eleanor became a special adviser on gender diversity for the CFP Board Center for Financial Planning. She has made a large financial and personal commitment to attracting more women into the business.

She asked the conference attendees, “How will we ever attract more women and people of color to our business if all the employers require experience first?” She exhorted the audience to begin evaluating potential as much as experience when hiring. She also urged employers to invest more time, energy and money in a disciplined process of career development and job progression.

Through their words and deeds, both Greg and Eleanor have highlighted a strategy for creating a legacy for the profession and a model for an enduring advisory business. The lesson for other advisors is that without a conscious human capital plan, advisory firms are failing to set up the next generation for success.

Unfortunately, the concept of “succession” has morphed into a focus on the sale of the practice rather than on the orderly transition of management, employees and clients. Consultants and consolidators are multiplying like rabbits to facilitate the capital investment into advisory firms and the buy-out of owners. Yet little attention is being given to governance, culture and career development once the founders of these firms depart.

How often have we heard advisors profess that they need an outside buyer because their current employees can’t afford to acquire the practice, do not have the experience and maturity to run the firm or are afraid to develop new business. The number of objections that advisors raise as to why an internal succession plan will not work is astounding. It makes one wonder what percentage of advisors feels more comfortable with transactions over engagement, with money over people and with short-term reward over long-term success.

Interestingly, other professions —most notably accounting, engineering, management consulting and law — have figured out how to expand and grow and evolve. It seems the advisory business is trying to answer the question, “What happens when the dog catches the car?” In other professions, there is no mystery because prospective partners are put on a track to take on more responsibility, finance the purchase of their ownership interest, develop their management skills and prepare themselves to lead.


In the spirt of “physician, heal thyself,” perhaps we should encourage advisors to engage in some self-therapy: Let’s begin with the end in mind.

Goal #1: Ensure that clients get the best wisdom and energy that my firm has to offer.

Goal #2: Ensure that should something happen to me, my clients will be served with minimal disruption.

Goal #3: Ensure that the people I hire have an opportunity to learn, grow and flourish in my practice.

Goal #4: Reduce dependency on me for bringing in new clients, managing the business, tending to relationships and performing all the tasks.

Clearly a divide exists between the goals of advisors and their commitment to reaching them. By putting clients first, advisors may realize that monetizing the practice is not the definition of success at all.


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