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Succession Planning


Most financial advisors focus on implementing strategies around next generation or successful exits, yet the majority don’t have a succession plan for their own business. Despite not having a plan in place, most advisors recognize the pitfalls of not having one.

CNBC recently wrote a piece on this very topic citing the following:

  • Fifty-four percent [of advisors] see a significant risk, and 41% see some risk, a 2018 report shows.
  • Just 13% of advisors at firms managing less than $50 million in assets have a formal plan, compared with 60% of those at firms managing at least $500 million. That means firms that producers have created that manage 500 million or more — 40% have NO plan!

So what is preventing you or any other financial advisor from developing your succession plan?

After working with thousands of experienced advisors, I’ve compiled the top five reasons I typically hear when I ask why a succession plan isn’t in place.

1. Lack of true commitment. Might as well start with the big one first. Too many say they want to create a business that runs like a machine while generating new business and delivering exceptional service but don't truly have the level of commitment that is needed. They mean well and say all the right things. Heck, many attend programs that teach them how to create thriving practices. Knowing and doing are two different things. Their action doesn't back up their vision. It takes more than a few tough decisions to build the business you desire versus the one you have now. Every risk has two inherent outcomes: achieve the objective or a lesson (yeah, I know some of you are thinking, isn’t it winning or losing? — that is another topic for another day). If you perceive failure as a negative, you have low risk tolerance. Not saying you have to like it, but never be afraid of it. One needs to have fortitude, courage, and confidence to weather the obstacles, setbacks, and sleepless nights. Isn’t part of success effort, energy, and time? Don’t forget the simple acronym IPDE. Identify what you want. What you are genuinely willing to fight for. This is a very serious emotional and intellectual process. We use our Blind Spot process to help people create that clarity. Predict or Plan is next. Create an actual strategic and tactical plan that is broken down into leading behavior indicators. Naturally, it covers many areas of the business — financials, business development, people, and processes, to name a few. The next step is the most crucial — Decision. This is the time to take serious stock in what the plan calls for. Are you truly looking at this objectively and committing to the plan? Make the decision that you will do what the plan calls for. “I will try” or “Let’s see how it works out” type of responses is not acceptable. That alone is a lack of commitment statement. Once you make that the decision, you are ready for the last step — Execution. It is time to get to work and work the plan. No looking back, no excuses, just execution. Never forget this rule: There is always a plan in play; whoever has the stronger plan always wins. If you don't have a plan, then you, by default, will become part of someone else’s plan. Without a strong plan, good luck.

2. We all have the same amount of time to work with, yet most fill up their days with tasks or appointments that don’t directly contribute to achieving their goals. “Not enough time” is actually a feeling best associated with stress, overwhelm, or anxiety. How do you fix the problem of not having enough time?

  • Just say no. We all duck and dodge what I call "fastballs." The phone doesn't stop ringing, and people are constantly asking for your time or attention. In these situations, you have to set boundaries and say no. If those "fastballs" aren’t contributing to your bottom line, they have to wait.
  • Know exactly what you need to accomplish. I work with my clients in the area of getting laser clear on defining their daily, weekly, monthly, and quarterly indicators. To be successful, you need a plan.
  • ime block. If you are working on an initiative, aka succession planning, you must consistently block out time in your calendar to focus on that particular initiative — and nothing else. You have to commit to using that dedicated time to making progress towards your goals.

3. Having a practice versus a business. Most financial advisors, while considered entrepreneurs, don’t distinguish between the words business and practice. The terms are often used interchangeably without regard for the actual meaning. One of the significant differences is the true foundation; “I” centered, or "We" focused. A successful financial advisory business is precisely that, a business — P&Ls, budgets, people in the right seats for the next several years, and clear development tracks. Consistency bleeds throughout the company, processes are not just present but owned and drive execution, there is a mindset of accountability without losing sight of having fun, and compensation that makes sense. It is "WE" based. The rainmaker(s) are not carrying the heaviest new business load. A business is not about one person but about the team growth and success — several other financial advisors with a wide range of experience who are paid for their advice. This model includes building an infrastructure to support both the advisors and clients. With this model, you spend most of your time working on the business. A successful business pays very well to the leader(s), but more important is the value of the business. Reputation is personal but also very much so the business. The business is referred whereas a successful financial advisory practice means attracting and retaining clients who will pay you for your services. This model is activity-focused and most often results in one rainmaker who offers its clients advice with support staff. This is the outcome of a successful producer who built systems and processes to make their life easier. Someone does the paperwork, another does the scheduling, and you may have others who focus on service work or doing the prep work for presentations/reviews. A practice needs the chief rainmaker to survive.

Most agencies are filled with practices, some generating a very nice lifestyle and paycheck for the rainmaker. Many call it a “lifestyle” business. You have most likely earned the same amount of money over the last few years. The reputation is you, not the business. Referrals are because of you and to you. With this model, you spend most of your time getting paid for your time, working in the practice. A successful practice will most likely generate a sizeable income for the advisor without much enterprise value.

Neither are bad, but they are dramatically different. Many have a practice but feel they have a business. The ones who grow to the next level realize they need to convert their mindset first from being a rainmaker to a CEO. Making the assumption you are playing the long game and want to build a successful financial advisory business, let’s plan to block some time out to discuss how I help clients transform their current situation into a well-oiled machine and profitable business. Call me directly at 631-726-3537 to schedule.

4. Unable to build a team or identify a successor. This area is where tons of mistakes happen, and some take many years to unwind. The first mistake is that people look at whom they have currently — big mistake. Always start with the end in mind. Based on your financial objectives, what is the org chart for this year, next, and the following year? With each spot there is a title and R/R. Only after you have a clear plan of what your people footprint must look like to reach your goals, then you look at what you have now. Who is in the right spot, wrong seat, or they have no seat, and lastly, what seats are open that need to be hired at some point in time. Once you have that locked down, take a hard look at two areas: attitude and habits. The majority of people don’t make it in their roles due to poor attitude or bad habits. Our team suggests that if you believe someone should be part of your new team, we ask them to take a competency-based assessment and personality test to help define their true abilities for today and tomorrow. We then pair the right people with the competencies required for the role.

It’s time to get the right people on the bus, in the right seat. While easier said than done, we strongly suggest the data make decisions, not your emotions. You can’t think about the person who has been with you forever but still struggles daily to meet minimum requirements. My team and I want to help you make those tough decisions — the right decisions needed to grow your financial advisory business.

5. Lack of Regulation. Today, there are no federal legal requirements for an advisor to have a succession plan in place. According to the North American Securities Administration Association, approximately twelve states do mandate a plan, specifically registered advisors are required to have a business continuity and succession plan to minimize “service disruptions and client harm that could result from a sudden significant business disruption.”

In an upcoming post, I’ll dig deeper into the process that my team and I use in helping advisors develop their succession plans.

If you are stuck and need an outside perspective on planning your exit strategy, please reach out to me via LinkedIn.

Remember to do a little bit all of the time, not a lot some of the time.

Glenn Mattson

Glenn Mattson

Glenn Mattson is a seasoned veteran of the selling profession, Glenn has personally built one of the leading offices for Sandler Training with his office ranking consistently in the top 1% of Sandler franchisees worldwide. He specializes in working with financial services producers and agency managers who want to shorten their selling cycles, grow their revenues, boost their productivity, and improve their operational efficiencies. Glenn's clients include many producers who seek to be MDRT qualifiers as well as Court of The Table and Top of The Table members who attribute a great deal of their success to the principles, practices, and, above all, the accountability Glenn brings to their practice. Glenn is based in Long Island, New York, but he's usually "in the field," working with clients all over the United States helping them to grow their business, revenues, and profits. Additionally, Glenn is a sought-after keynote speaker, available to speak to small or large groups on emerging business topics.