What Will it Take to Finally Create a Succession Plan?

It is often not the lack of will, but the lack of impetus that prevents advisors from their own succession planning. Sometimes all you need is a  compelling enough reason to start! Financial advisors spend their careers assisting clients and helping create plans to drive and maintain financial wellness. But just like the proverbial shoemaker, they’re not planning for their own future unknowns.

From developing financial plans, to estate planning and risk management, financial planners play an integral role in their clients’ lives. And yet according to Cerulli Associates, fewer than 75% of advisors have their own written succession plan.

What Is Your Catalyst?

Financial advisors are feeling the impact of our current environment and more have realized the need to address their own practice’s future. Those forces include:

The uncertainty of increased market volatility?

Since the 1800s, the average secular bull market generally lasts about 12 years. We’re currently in year 13, which means the market is due for a correction. COVID has just added more uncertainty and volatility. Advisors thinking about retiring and hoping to earn top dollar for their practices should think about selling sooner—not later. If they haven’t already begun to prepare for sale, now’s the time to start. Succession planning is a marathon, not a sprint. It takes time to ensure a seamless transition.

The need to learn new skills?

The pandemic forced a digital revolution across all industries including financial advising. There is increased reliance on technology across the board as COVID-19 dramatically altered interactions between advisors and their clients and prospects. In-person meetings transitioned to online video conferences via platforms like Zoom, and while the pandemic is slowly coming under control, newer variants and community outbreaks have some clients and advisors leery about resuming face-to-face meetings.

Technology will remain an increasingly important communication tool for financial advisors to conduct basic business. For many older advisors, it’s uncharted territory, and some continue to face challenges posed by simple transactions like obtaining client signatures. Are you among them?

The scare of health issues?

With a greater percentage of advisors over 70 than under 30, physical and mental health is another factor influencing and driving older advisors to consider developing and implementing a succession plan. Think about the valuation of a sole financial advisor’s practice. Should the advisor become incapacitated, the practice they built over decades effectively falls to zero. Don’t let that happen to you and your family.

And, should their advisor fall ill or worse, clients have no one to connect with who’s familiar with their individual situation or who can pick up and step into the advisor’s role. Advisors also assume greater liability as they may experience diminishing capacity and mental acuity as they age. Plan early to exit gracefully.

The challenge of aggressive regulation?

Regulatory oversight has increased tremendously, especially in cases where someone acts in the capacity of a broker. The SEC’s Regulation Best Interest (Reg BI) has increased requirements—and corresponding workloads—for advisors around communicating with and documenting client conversations and recommendations.

Here in Massachusetts, we know that Secretary of the Commonwealth William Gavin has begun writing up as “deficient” those advisors who haven’t yet put a written succession plan in place. Massachusetts is one of 12 states mandating that advisors must have a written succession plan.

No Better Time Than the Present

Developing a succession plan takes time. Not only are there the transactional aspects involved in selling a practice, equally challenging are the transition’s emotional elements. Over the course of building and maintaining relationships, clients become friends. Succession planning may impact families, too.

Ultimately, the driver of selling a practice distills down to one important factor: finding an advisor who shares your philosophical beliefs and who will operate in the best interest of your clients. The process comes down to trust.

TAG 2.0 Has Built-in Continuity Planning

If you’re one of the majority of financial advisors without a succession plan, or you’re in the process but haven’t finished yet, talk to us. Trust Advisory Group created its TAG TEAM model to ensure business continuity and peace of mind for advisors and their clients. TAG purchases financial advisors’ businesses at fair market value and seamlessly transitions advisors, clients, and their assets to maintain continuity of service. While the TAG TEAM works to increase revenue through your existing book, you will receive incremental revenue generated throughout the transition period until your contracted earn out period ends. Our programs include:

Listen to one advisor’s experience transitioning to TAG 2.0 as he describes actually coming out ahead financially after retiring with TAG. Learn more about all of our options for transitioning advisors, and contact us if you have any questions.

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