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Back when I was an active member of the Rotary Club of Seattle, one of its leaders built an eponymous Mercedes Benz dealership. He became Rotary President shortly after he transitioned management of the business to one of his sons. As he reflected on his transition, and how he was spending his time, he explained that he viewed his life in thirds:

The first third was committed to learning; the second third was devoted to building a career and a business; and the final third was dedicated to making a lasting impact on others. Such compartmentalization helped him to make the transition from being known for “what he did,” to being known for “who he is.”

This evolution is a natural part of the lifecycle of an independent financial advisor. Typically, a firm founder spends decades growing a business and fostering close relationships with clients who depend on them. It can be challenging when the time comes to transition clients to others in the firm.

Many leaders struggle with their relevance as they move out of the workplace. Frequently we observe a touchy dynamic between the founders and those they mentored, a population I refer to as the “remainders.”

When we listen to the founders, their comments include: • Our employees are good technicians but they are not good business developers. • Because they have no skin in the game, they have no appreciation for the risks I’ve taken. • My partners have no clue how to manage a business. The remainders, on the other hand, ask questions emanating from their frustration: • When will he (she) realize I’m not a kid anymore? • Why does he always second-guess my management decisions? • When will she get out of the way so that we can take the business to the next level?

It’s fascinating to observe otherwise effective communicators talk past each other. It’s even more fascinating to see decisive people plagued by indecision. Firm founders may choose to postpone a plan to delay the inevitable transition. Neither the remainders nor the founders benefit from this situation.

In the best of circumstances, the founder will do for himself what he did for his clients: gather the facts, define the goals, identify the gaps and develop a plan to achieve success. In the worst scenario, he will second-guess his colleagues, question their integrity or decision making, interfere in areas where he has empowered others and generally act badly towards his successors.

The former generally results in an orderly transition plan. The latter usually results in the sale of the business to an outside party or the dissolution of the practice. Successors who are at an impasse with founders generally find it easiest to go elsewhere.

Founder Conundrum Unfortunately, too many conferences on succession focus on how to maximize value and structure deals. Not enough time is dedicated to the development of the individuals who will assume responsibility for managing the business and growing clients as the founder slows down. Hardly any address the emotional challenges the founders will encounter.

Advisory firm leaders who recognize this dilemma in themselves should get professional help. This may mean speaking with a succession specialist or a psychologist or a trusted friend who has gone through a similar transition.

At a minimum, aging advisors should take time to reflect on what they have accomplished as individuals. It can be hard for entrepreneurs to celebrate their successes because they typically focus on achieving their next victory.

Many in this business wind up comparing themselves to their clients and regretting that they have not achieved the same level of wealth or independence. Pursuit of the elusive distracts us from enjoying our real gains. As a result, frustration, fear, anger and irritation set in.

In addition to self-evaluation, advisors should take stock of their business. When you identify what is working well and what still needs work, you can create a plan that eliminates any seeds of doubt. I

f the assessment reveals that the business is dependent on the founder for new client growth or effective client management, these specific problems can be addressed. Merging into a larger firm may be expedient, but not always fulfilling.

Succession specialists encourage advisors to begin the process at least five years before the founder intends to transition out. Even if key employees or partners do not take over the business, the growth and continuity of the practice will enhance its value to an outside buyer.

How To Move Forward Once you appreciate all you have learned in your life and acknowledge the business you created, you can begin to think about the third stage of your life. Most business owners I’ve known find the transition out of their company easier when they have another place to go, or another thing to do.

Those who do not disengage often find that coming to work each day becomes a nasty habit that results in unhealthy relationships with the remainders. Clients of the firm still view you as their advisor and employees still view you as their boss. Those who took over key roles become marginalized and paralyzed by your continued presence and interference.

When I was a partner in a large accounting firm, we required partners to begin moving their clients to others when they were age 55, and to complete this process by age 60. Failure to follow this discipline resulted in adjustments to their compensation and their retirement plan payout. Most advisory firms are not in a position to do the same, but the concept still applies.

Partners and employees must recognize they are working with a firm, not just an individual founder. Founders who keep a death grip on clients and business ownership need to recognize that — voluntarily or involuntarily — the relationship will end.

The third stage of life is a time to enjoy all the wisdom and wealth that you accumulated in the first two stages. Some may view the third stage as a time of recreation and rest, but most people who have charged hard during their lives find putting their energy and passion to work in some other way more fulfilling.

The options are many — board positions, consulting with other businesses, philanthropy, community service. Sort through what would fulfill your passion. The learning process begins again, only now you can focus on opportunities to impact the lives of others.

One of my friends shared that he and his wife used to write checks to different causes, but never felt as though they were creating a legacy.

As he neared the end of his working life, they both agreed to focus on two areas where they could make an impact — not just by writing checks, but by active involvement. The enjoyment they both receive as a result has helped them to remain engaged not just with their community but with each other.

It is challenging to recognize that the end may be closer than the beginning, but that doesn’t mean we must watch and wait. Happily, others can benefit from the knowledge and wealth we have accumulated in the first two-thirds of our lives. A graceful exit is well worth the effort for everyone involved.

Mark Tibergien is CEO of BNY Mellon’s Pershing Advisor Solutions. Tibergien is also the author most recently of “The Enduring Advisory Firm,” written with Kim Dellarocca of BNY Mellon and published by Wiley. He can be reached at [email protected].


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