Continuity and Succession Planning Process



Succession Planning, with the possible exceptions of robo-advisor, bitcoin and the DOL rule, dominates the news in the advisory press. There are basically two ways in which to monetize the business that you have spent your entire career building, externally or internally. Externally, you can sell you firm or practice to a buyer outside your firm. If you are aligned with a broker dealer, you can even sell it outside your broker dealer. To sell your firm internally, and do it right, you need a written Continuity and Succession Plan and you have to find a suitable successor. The primary difference between an internal sale and an external sale can be summed up in one word; control. The internal  plan allows you to control the terms, the timing, and the price in a way that an external sale can rarely do.

Here is an Example:

Our client was a healthy 64-year old advisor with a strong business producing almost $3 million a year in revenue. He had 25 employees, but he was so integral to the success of the business that clients began to worry. We created a plan and inserted two young advisors into the plan; one who was a strong producer, the other a talented business manager and portfolio manager.

Fast forward two years. Our client goes to South America to help build schools for needy children in the mountains and contracted an exotic disease. For the next 7 months, he worked about one-half day, every two or three weeks. He literally would have lost the business had he not had a plan to instruct staff and the people to carry it out. The plan took care of the business and the people who he cared about; staff and clients alike.

The point here is that succession is simply the conclusion should the plans for continuity become permanent.


The Empathetic Buyer™Process

Our Continuity and Succession Planning Process, developed over the past two decades, is designed to give you, the advisor-owner maximum control over all of the elements of the Plan, as well as to identify and vet candidates for an internal successor who you will feel you can trust with your clients, your staff, and the future of your firm.

 Step 1: Data Collection, (Simultaneous with Step 2)

We will collect appropriate financial data to complete a valuation on your firm. This is the basis for the Value Proposition, which comes later. Understanding where your firm is today is critical to helping you determine the best way to distribute it and to be compensated fairly. We use our own Practice Management Questionnaire, a Position Paper on where assets are invested, and your P&L statement. Why is the Position Paper important? Because we want to attract successors who can easily be convinced to align with your approach to investing.

Step 2: Answering the Critical Questions

The concept of a change in relationship with your clients is perhaps the most difficult paradigm shift you will ever experience in your career. Going from trusted advisor to retired advisor should not be taken lightly and we spend a great deal of time before and during the Process to help you come to grips with this reality. The reason that many advisors choose the internal sale option is in an attempt to soften the emotional effect of this change. Some of the questions you will tackle include:

·         When, if ever, do you want to completely retire?

·         How many hours a week do you want to work leading up to complete retirement?

·         What do you consider the perfect profile of a successor?

·         Do you have someone currently who could be the successor?

·         When do you want to begin transferring equity, and how?

·         How stable is your firm?

·         What is your Value Proposition to clients?

·         What is your Value Proposition to a potential successor?

·         How do you plan to train your successor?

·         What exactly would you like to see happen to your firm and clients and on what schedule? In   addition to a named successor, who else would you like to take care of in your firm, (staff members)?

These are just a few of the questions we will help you consider. The consideration of these questions will understandably scare the daylights out of a lot of advisors. However, it is critical to work through them. We are fully aware and empathetic to the emotions the questions can produce and are here to help you work through them. It is our position that if you are not able to tackle these, you are not ready to find a successor. A strong candidate for a successor, (and why consider a weak candidate?), will not join you unless you have a good handle on these. Together, we endeavor to help you get answers to these and other questions before we develop a Plan.

Step 3: Developing the Plan

The development of the Plan is an exercise in not only continuity and succession, but also in growth. Firms with a defined Continuity and Succession Plan find it easier to recruit advisors and also to bring on more significant clients. Clients want to know that the firm will be there when they are ready to retire, not when you are. This is the Step in which we develop a Plan that fits your criteria for how you want to your firm assets and clients to be passed to the next generation of your firm, how and when you wish to retire, how your book of relationships and assets will be valued, and how you wish to be compensated. The Plan indicated how a successor will be given the chance to buy in, (never give equity away), and who else in the firm will be favored. Perhaps for example, you wish to protect a long-time employee’s job. Perhaps you want to save room for a younger child who is not ready to take over yet. When the plan is completed, deliverables will include:

·         A comprehensive plan for continuity and succession to include all of the employees that you wish.

·         Design a plan that gives you the ability to get the full value of the firm before it is exposed to the uncertainty of handing it to the next generation. At the same time, you will be able to experience financial advantage from the firm for years to come.

·         A model for future generations of successors.

·         Create comp plans for the future “equity team” that will allow them to earn equity while maintaining your controlling interest until you are ready to relinquish it.

·         Create a plan for the future management of the firm consistent with your wishes

·         Create a plan to train the successors

·         Indicate the provisions that need to be included in any legal documents

·         Jibe the plans with your overall business plans and objectives.

·         Assist you in communicating the plans, and if necessary, “selling” them to those affected. (We can also help you design something to release to clients and prospects)

Step 4: Finding the Successor

Advisor Search Process

Considerations - It should be noted that there is a marked difference when recruiting an advisor to join your firm, as compared to recruiting an advisor or RIA to ‘affiliate’ with a broker-dealer or clearing firm. Whether you are recruiting an advisor to become part of the execution of a Continuity or Succession Plan, or simply joining your firm to add growth, and another producer, you are recruiting an employee who will sit next to you for the foreseeable future, possibly become an equity partner and successor and become part of the culture of your office. In effect, the advisor is part of your Value Proposition to clients and the community. In the case of a successor, there is consideration given to not only production abilities, but skills for management, compliance, hiring, and running the operations of a firm. In effect, in the case of a successor, you are actually finding a buyer. Due to these facts, we take an executive search approach, which is identical to the Process we use when we are finding a senior executive for an investment management firm. This is a Process that we have refined over almost 21 years, to yield predictable results.

Value Proposition and Standards of Performance- The development of the Value Proposition, (VP), is critical in that it defines what you have to offer an advisor. This is different from the VP that you use to attract clients. It is important for an advisor who fits your criteria to understand why he/she should consider working with you, as opposed to under someone else’s umbrella or as a stand-alone advisor. You also want to define the type of advisor that you want in your office. Does the advisor possess management skills? What level of production do you expect from the advisor? The answers to these and a number of other questions affect the VP, because you have to be able to articulate your benefits. In many cases, we are asking an advisor to change not just broker-dealers or clearing firms, but the course of his or her career. More immediately, we, as your representative, have to be able to articulate those benefits and recognize your target advisor type. An important part of our work with you is to create the VP and Standards of Performance and expectations for the advisor you seek.

Research Consultant Assignment- As part of an engaged search, we assign one or more of our Research Consultants to work specifically on identifying potential advisors. Before the Assignment is complete, the Research Consultants will make hundreds of calls to create a pool of advisors who have “raised their hand” to be considered. These individuals will be passed to one of the Senior Partners, (Casey or Gavin), who conducts the vetting and the rest of the Process.

Research - In identifying the potential universe of candidates, we employ the following tools and methods: a) industry databases we subscribe to, b) our proprietary database, c) custom in house data mining tailored around the client’s specific value proposition and d) our extensive contacts in the advisor and wholesaler communities and others who have relationships with potential advisor candidates. In addition, market research is conducted to assist the client in compensation expectations, as well as the level of experience and achievement desired.

Search - From the identified pool, we begin to target those candidates with the profile desired. Benchmark candidates are presented to allow for client feedback. We encourage appropriate candidates to explore the opportunity to address the client’s situation. (It is fair to say that we at times “sell” a candidate on taking a closer look, always-taking care to be open and upfront about the opportunity and its challenges.)

Vetting (Discovery) - This is by far the most time intensive and the most critical step in the process. Frankly, it is where we distinguish ourselves from other consultants in the advisor space. We are looking to match the objectives of the candidate advisors with those of the client-advisory firm. Using the criteria of the advisory firm as a guide, we conduct a comprehensive examination of the practice and the goals of potential candidates. A big part of this examination is the advisor’s attitudes as they pertain to money management and client acquisition. We analyze the practice to determine the number of clients and their nature, the investment mix, and how the advisor finds new clients. We perform basic behavioral analysis. For example, many advisors want to bring on the so-called break-away brokers from wirehouses. These can be great advisors, but why do they want to leave? Are they breaking away because they truly want more independence in the services and solutions they can offer their clients? Or are they leaving because they are just not very good advisors and cannot produce at the levels required at the wirehouse firm? It is not necessarily a deal killer if it is the latter, but we want our clients to know what they are getting. We encourage clients to make use of the Kolbe Assessments and/or the Directional Insight Assessment. Our Founder, Casey, is particularly fond of the Directional Insight Assessment for purposes of judging the skills and personality traits of potential successors. As mentioned above, in the case of a successor, there is consideration given to not only production abilities, but skills for management, compliance, hiring, and running the operations of a firm. We are also exploring the value that the candidate-advisor is expecting to get from his/her book or practice if a sale or merger is part of the transition. We should mention here that motivation for the move is particularly troubling if the sole reason is money.

During this period, we develop a close relationship with both client, (you), and the candidate-advisors. We find that ‘holding you hand’ through the Process can be critical to setting the stage for an early success during the transition to your firm of a successor. At the same time, the relationship we develop with the successor, (future buyer), of your firm, can reap important benefits to our client, as we understand the candidate’s thought process and they tend to “open the kimono” for us to learn what motivates them and what turns them off.

We believe that this stage is where assignments succeed or fail. Therefore, we are adamant that clients follow our lead from this point forward.

Presentation – We present the top advisor candidates to our client-partner, providing them with comprehensive background on each of our selections. We present honest appraisals of candidates, rather than selling them to our clients. We owe the client the strengths and shortcomings of each candidate at this point. It is our charge to be both consultant and confidant as the client decides who best fits the needs of his/her firm. We set meetings, prepare clients and candidates, debrief all parties after meetings and assist in the preparation of offers. We try to get both firm owner and advisor/candidate on the same side of the table, looking at the situation to see if there is enough common interest to move forward. You are thinking of having this person in your office every day. How do they fit with your staff? Does the advisor bring enough revenue with him/her to offset your costs in the first year? Does bringing him or her in, put you on track to accomplish your immediate and long-term goals? Can a compensation package that benefits all be constructed? As your search partner, we work with you to address and reach conclusions to all these questions.

Offers - It is our job to negotiate before it ever gets to the formal offer stage. The groundwork begins back in the Research phase, and continues throughout the Process. We want everyone’s eyes wide open; communication and transparency are the keys to success.  We often develop the compensation packages for our clients, as well as Offers and Partnership Agreements, (of course, these are subject to legal and compliance approval).

Follow-up - After the offer has been accepted, we work with both the client and candidate to ensure a smooth transition. We stay in touch with the new hire for at least a year to help identify and head off problems and concerns that sometimes arise in the early stages of a business relationship. By this time, we have developed a close, trust-based relationship with the candidate. This can be very helpful to both the candidate and the client.


Facing retirement for some, feels something like planning your own funeral. You never thought you would get there, and now that the time is near, many advisors put it off indefinitely. It does not have to be this way. The reality is that some potential, and even current clients, start to wonder who will take care of them if their aging advisor retires, or even dies. A defined Continuity and Succession Plan can alleviate their concerns and actually be accretive to your firm. We believe that at least the Continuity part of a plan should begin as soon as you have something of value to lose. What happens if you have an accident of illness that lays you up for 6 months? We have been helping advisors address these issues for over a dozen years. It is personal to our Founder and therefore to the rest of the firm. We know it is personal for you. Statistics tell us that for most advisors, the Process is 70% emotional and only 40% financial. There are several firms who can help with the financial side. It is not rocket science. We are told by our clients that we are alone in our ability to address the emotional and control parts of the Process. In addition, finding and vetting a successor is substantially different from recruiting an advisor to just produce. We do not engage in the latter; we focus on find and vetting the next owner and leader in your firm. The person you trust to take care of your friends and even family when you step back.

Final Thought

Many advisors put off this process because they fear losing control of their firm and even their lifestyle. Most advisors we work with do not plan to retire right away. They begin with a plan to protect the firm, staff, and clients from an untimely accident or illness that takes them out temporarily. The plan also includes what would happen if the accident or illness is fatal. The development and installation of the plan has an ancillary benefit. It tends to identify pressure points, increases staff accountability, and helps a firm run more efficiently and profitably.

Keep in mind, a plan can be written to give the owner-advisor the ability to change it…up to the point when he or she cannot.