Creating a legacy through succession planning

01 October 2014 Bertus Visser, PSG Insure

Advisers who have built up a successful practice over many years tend to have loyal clients, and often do business into the third generations of families. Some advisers bring their children in to help take the business forward. However, not everyone is in this position. The question is then: what happens to the clients, the practice and the value of the business when an adviser can no longer continue?

Unfortunately, many excellent advisers who have been in the industry for many years operate without an ideal solution to these challenges. Without necessarily admitting this to themselves, they resist tackling succession planning.

Due to the fact that they are so dedicated to their work and their clients, they always find reasons why succession planning cannot be done today.

Bottom line, many advisers simply do not want to part ways with their clients as they do not really believe that anyone else can service their clients the way they do. They are passionate about what they do, they live for their clients, and these clients have been with them for many years.

Losing talent

I have also seen situations where a potential successor from outside the practice is hired, only to leave the business a few years later. Was the wrong successor chosen, or was the adviser simply unable and unwilling to pass on the clients and share the business?

Not many advisers retire. Instead, they tend to hang onto their clients for as long as they can. However, no one knows what the future holds; an adviser may die suddenly, or become incapacitated. What happens then?

Advisers who do not want to let go, do not create space in their business for new talent. In the end, their clients, staff, business and they themselves all suffer.

Create continuity

Clients need continuity, and not just continuity of a relationship. They also need to know that their agreed financial planning goals will continue to be pursued by whoever takes over the relationship, and that their financial plans will play out successfully.

Service levels need to be continuous as well, such as how often their portfolios are reviewed. This, in turn, entails continuity of standard business practices.

Providing continuity is about the total experience the client has with a practice. This can, to a large extent, be maintained if consistent values, principles and processes are embedded throughout the business.

Understanding the facts of life

More often than not, clients understand that life happens and that people move on in one way or another. They can live with that as long as the financial planning philosophy and processes as well as the level of service they have come to expect do not change dramatically.

They will also feel better about a change in their key relationship if they know that your practice has properly planned for and implemented a succession plan.

Succession planning is not something you do the day an adviser dies, leaving the executor to try to put something in place. Unfortunately this often happens, which is not in the best interests of clients or the practice as the business can become virtually worthless.

Harmonise business practices

To merely have a contract in place stating that your business will be sold to a nominated individual is not ideal. There are normally different business processes between the practices, no existing relationship between them and capacity constraints at the new practice, which can be challenging.

The ideal solution would be to have a strong partnership amongst a group of advisers, and for clients to have relationships with more than one of them. There should also be a workable buy-in or sell-out process in place. A partnership can be a win-win for you, your clients, your partners, and your practice, providing you are like-minded.

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