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Practice Management > Succession Planning

3 Must-Ask Questions for Succession Planning

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In a classic movie line from “Ferris Bueller’s Day Off,” Ferris says: “Life moves pretty fast. [If ] you don’t stop and look around once in a while, you could miss it.”

That sentiment is bigger than a teen comedy. When it comes to succession planning, many advisors come to the end of their career and find that it flew by them — and worst of all, they don’t have a succession plan.

As you build and grow your firm, you must be intentional about your succession planning. Good succession planning, just like the retirement planning you do for your clients, begins years in advance.

If you don’t work with intention when building your succession plan, you’ll arrive at the end of your career without options to capitalize on what you have created, and a legacy for your business to carry on without you.

Too often, advisors are like the proverb of the shoe cobbler whose own children have no shoes. Advisors frequently create succession plans and develop legacies for their clients but ignore their own.

Make a Plan

For succession to work, you need to be focused about it. This means you need to put time and effort into determining how to handle it. In general, there are three primary questions to answer when starting a succession plan:

  1. Are you building a company to eventually sell?
  2. Are you building a company to incentivize someone else to take it over?
  3. Or, are you simply building a company for yourself — your lifestyle, etc.?

As you think about the answers, let’s explore the options you have with succession planning. I am oversimplifying here, but in general there are two basic types of succession plans: internal and external.

In an internal transition, you’re transitioning to a family member or the second generation of talent you’ve hired and trained in your firm.

Internal transitions take the most time, because they involve bringing together and finding the right people who are technically and strategically skilled, and who share your same values enough to take over and run your firm without hurting the brand.

In many cases, an internal succession plan, done right, will earn you more money. But the mistake is choosing a single successor.

It’s often better for your firm to begin the transition plan early to get more employees to buy-in and get involvement from multiple staff members to carry on the legacy.

Once you have the internal plan rolling, don’t ignore outside factors. An external sale is always an option, assuming you have prepared yourself for this transition.

An internal succession allows for higher payouts over a longer period of time. But having many options in the event that your first plan doesn’t work out is where external transitions — selling your firm to an outside party — can really help out.

Other Issues

No matter which primary succession planning strategy you adopt, you need to put it in place early to give yourself enough time to do it right.

Don’t overlook that succession planning done right is necessary for your clients as much as for yourself. You want to create a transition that will best serve your clients and the team members who will remain even after you leave.

Many advisors have good intentions about their succession plan. But far too many start the plan and never finish. While good intentions are necessary, they won’t get you to where you want to be.

Jarrod Upton, MBA, MS, CFP, is chief operations officer and senior consultant at Herbers & Co., an independent management strategy consultancy for financial advisory firms. He can be reached at


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