Succession planning is one of the most delicate processes that a firm will undertake.
Few choices carry more weight than naming a successor, and yet too many firm leaders leave that search until it's nearly too late, only to discover that there's no one adequately prepared to take the helm. The candidates you need should already be in the room: people well-versed in your business procedures, your culture and your core values.
Building that bench takes years, not months.
Whether a founder is nearing retirement or has several decades to go before succession planning becomes a pressing concern, instituting a culture of mentorship should be an ongoing top priority.
Effective succession planning does not begin the moment that transition plans and documents are being drafted; it starts much earlier, as the seeds of a prosperous future are sown and tended to through consistently reinforced best practices.
Firm leaders who want to see their business thrive well beyond their eventual exit need to be mindful of how they engage younger staff and the overall dynamic between veteran advisors and their emerging counterparts.
Does the firm facilitate an environment where mentorship is readily provided and junior team members can comfortably ask for support? Are there dedicated initiatives to bolster the skills of younger staff and prepare them for future firm-wide leadership roles?
As firm leaders ask these questions, here are four steps to put into practice for successful succession planning.
1. Bring patience to the process.
When onboarding a new advisor, resist the urge to immediately put them to work. Give them 90 days to absorb the culture. Assign them a book, have them sit in on meetings that have nothing to do with their role, and let them develop a feel for who you are as a firm.
Most organizations aren't willing to do this, but the patience pays dividends. Also consider your incentive structures: Rather than bonusing only on net new assets (a metric that new advisors have limited control over), reward assets brought in. It may cost you margin in the short term, but it teaches younger advisors to think like rainmakers, and they'll grow into the harder metrics over time.
One of the largest recurring obstacles in effective succession planning is the inability of firm leaders to check their egos at the door when engaging younger staff. Seniority can insulate advisors from the day-to-day realities faced by the next generation, causing veteran advisors to become dismissive of newcomers' perspectives.
This adversarial dynamic results in older advisors discouraging up-and-coming talent from expressing their ideas and embracing growth opportunities, ultimately dampening their enthusiasm for their trade and their firm.
This dynamic exacerbates the already significant challenges that generational divides and accompanying disparities in outlook and disposition pose to firms' long-term prospects. If seasoned advisors want to successfully plan for their firm's future and ensure its longevity beyond their own leadership, they need to challenge themselves to check their egos in the service of developing their successors.
Advisors who fail to do so are likely to find upon their departure that they're short on qualified successors to fill their role.
2. Build rapport through alignment.
Two behaviors consistently undermine younger advisors, even when intentions are good.
The first is over-inserting in client meetings. If you've told a junior advisor they're leading the meeting, let them lead it. Defer to them visibly and repeatedly, even when you feel the urge to take over.
The second is playing constant firefighter: Rushing in to resolve every problem robs the next generation of the chance to develop their own judgment. Reserve your direct involvement for true five-alarm situations. In those cases, step in, but stand side by side with your junior, not in front of them.
Building better rapport between older and younger advisors requires interpersonal alignment, and the misalignment runs in both directions. Veteran advisors can be prone to perceiving the next generation as less hardworking, coasting on the labor of their predecessors. But the next generation's different approach is not a lack of work ethic; it's a different starting point.
Meanwhile, newer advisors joining established offices often expect ownership before they've earned it. Younger advisors also need to understand what it actually took to build the practice they've walked into.
That client with $10 million under management may have taken 20 years of relationship-building and hard conversations to get there. A small mistake to you can feel like a significant breach to the advisor who spent decades earning that trust.
Understanding the person behind your mentor is not just good manners. It's good strategy.
3. Mentor with a purpose.
Encourage younger advisors to intentionally seek out ways to add value beyond their stated role, whether that's helping a senior advisor navigate a new technology, staying late to work through a problem or engaging actively at firm events rather than clustering with colleagues.
And when senior advisors find someone genuinely talented, consider building the role around them rather than forcing them into a predetermined box.
Some of the most valuable hires don't fit the job description you had in mind; they fit a better one that you hadn't imagined yet.
Firms that fail to develop their roster of potential leaders with the same attentiveness afforded to their book of business are doing a disservice to both their staff and client base. Should a changing of the guard occur without suitable replacements on hand to ensure continuity of service, investors may be inclined to make changes of their own and take their assets elsewhere.
The relationships that advisors cultivate with clients — and often their families — can span generations. However, this requires leaders to foster intergenerational unanimity within their firm.
Firms built on mentorship and cooperation outlast those built on singular personalities because their strength lies in being bigger than any one person or career.
Advisors who want to build something lasting need to look beyond their own biases to nurture what will strengthen the firm in the long run. Intergenerational relationships — where younger advisors have room to succeed or fail on their own terms — will enshrine a firm's legacy far more permanently than any lone investment strategy or lucrative deal ever could.
4. Prioritize levels of experience.
Make intergenerational connection a structural habit, not a happy accident. Surround yourself with people at least a decade younger and a decade older as each direction offers something the other can't.
Younger colleagues can help you evolve your client intake processes, your technology and your communication style in ways that keep your practice relevant. Older ones offer perspective that can't be replicated by experience you haven't had yet.
The firms that figure this out don't just survive leadership transitions. They barely feel them.
Scott Danner is chief growth officer at Steward Partners, a financial services firm catering to family, institutional and multigenerational investors.
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