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Five Reasons Advisor Succession Plans Fail

Financial advisors help their clients plan for the near- and long-term future. And yet many of these same advisors — one study suggests 60% of advisors within five years of retirement — have not taken time to create succession plans for their own business. Gary Campbell at Forbes thinks it’s likely that many of these advisors have similar reasons for delaying creating succession plans as their clients offer for waiting to get serious about their own financial plans.

Many experts caution that waiting too long to develop and execute a succession plan can delay an advisor’s exit strategy for years. It’s recommended that advisors begin planning early — as much as 5 to 10 years in advance of retirement — to avoid some of the main reasons why succession plans fail.

  • Unrealistic expectations for a business valuation
    Advisors may be unfamiliar with all the factors that contribute to calculating their business’s value. Conducting valuation in plenty of time gives advisors an opportunity to strategize and implement changes to increase the value.
  • Not finding a good match
    Advisors want to align with a successor with similar values. Finding that successor who will nurture and care for clients equally well takes time.
  • Inadequate successor mentoring
    Advisors who leave their businesses to younger, less experienced successors must prioritize mentoring. It takes time to teach a successor how to lead, delegate, make decisions, and resolve conflicts.
  • Not integrating successors soon enough
    Experts recommend starting the integration practice months — if not a few years — before actively retiring. This slow transition helps advisors’ successors to understand the brand, processes, teams, and clients.
  • Not accounting for what-if scenarios
    Advisors encourage their clients to plan for the unexpected — unforeseen health issues or market fluctuations. It’s only logical for advisors to incorporate those scenarios into their own succession planning, too.
 
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