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While most advisors recognize the value of developing and implementing a business continuity and succession plan, fewer than 30% of advisors have a formally documented plan in place and the regulators are starting to take notice.

It’s akin to the plumber’s own pipes leaking — or the shoemaker’s kids going barefoot. Just as sticking buckets under the leaks or telling the kids to wear flip flops isn’t a viable long-term solution, neither is ignoring the inevitable time when you’re ready to step away from your practice to relax and explore other pursuits. Or worse: when you’re forced to do so for some unforeseen reason.

And yet many advisors are in denial about their own retirement and choose not to address succession planning. In the eyes of regulators that constitutes serious negligence of their fiduciary duties.

Who are you? Are you the plumber or the shoemaker - so focused on your clients that you’ve neglected to plan for your own future? If so, that’s a...

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.

According to Gary Stern at RIAIntel, Registered Investment Advisors (RIAs) spend their careers helping clients to achieve and maintain strong financial health. Yet many RIAs give little thought to protecting their own financial health through the creation and implementation of succession plans.

A range of factors is at play:

  • Many advisors are working well past retirement age — even into their 70s — and have no plans to retire
  • Other advisors feel that the informal succession plans they’ve created will suffice
  • Some advisors have given little thought to their own mortality, choosing to bury their heads in the proverbial sand

But when advisors become incapacitated suddenly, or pass away, a whole host of issues arrises. Clients wonder how to access their assets and financial plans — and find a new advisor whom they can trust. The advisor’s own financial future — and the future of his family and loved ones — is in jeopardy, too.

Since many advisors are at or above 52 years of age, and 40% of advisors are expected to retire within the next 10 years, experts recommend that advisors take steps sooner — not later — to protect their books’ values. “A seller’s market will turn into a buyer’s market,” cautions Marina Shtyrkov, a Boston-based research analyst at Cerulli. And that potential glut of financial practices saturating the market as more analysts retire will shrink the value.

One way to preserve a book’s value, protect valuable client assets and the analyst’s own best financial interests is for those analysts without a concrete succession plan to take steps to create one — admittedly a challenge for those solo practitioners outside larger cities or working in remote zip codes. But while a challenge, it just makes good financial sense to make the time to create and put that plan in place.

Article Excerpt:

#FASuccess Ep 164 with Julia Carlson on how transitioning out of a financial advisor role and adopting EOS helped give her time to focus on growing her...

TAG Advisory Services's Insight

This podcast features Julia Carlson, founder and CEO of Oregon-based Financial Freedom Wealth Management Group. She shares her personal experience of an unexpected life event that resulted in a quick transition from the firm’s lead advisor to its business owner instead. Carlson talks about the real-world challenges of trying to let go of the significant control over your own businesses when life throws a curveball.

Article Excerpt:

Valuation expert Carla McCabe said at the Investments and Wealth Institute conference Monday are overvaluing their...

TAG Advisory Services's Insight

Carla McCabe, valuation expert and vice president of Truelytics, says that advisors are robbing themselves of finding external buyers by demanding too much money for their book of business. She says the best succession plans result from 7 - 10 years of strategy and preparation — and regular updates as things change.

Article Excerpt:

Part of putting clients first may be knowing what will happen to them if you get hit by a...

TAG Advisory Services's Insight

Read the original article by William McCance, President and CEO of TAG Group, Inc.

Over the next 25 years, an estimated $68 trillion is expected to pass from the Baby Boomer generation to their millennial heirs (according to research by Cerulli Associates). While this may be a signal of healthy activity for the financial advisory industry, unprepared advisors could be in big trouble if they are not mindful of one key ingredient: retaining their clients’ heirs!

The relationships they’ve built with their clients are not necessarily going to translate over to their...

Article Excerpt:

Resources help parents share appropriate financial lessons with kids from six to...

TAG Advisory Services's Insight

Most people with families will tell you that their main concern is protecting and providing for their children. While the clients themselves may have found their own success, they often find themselves struggling to pass on financial literacy and savvy to their children, which increasingly becomes a concern when thinking about ensuring their children’s financial well-being. This creates an excellent opportunity for the advisor to step in and provide bite-sized financial literacy education to help the client accomplish this; such examples might include teaching money-related concepts to children at an early age or otherwise passing along easily digestible financial lessons via email. By doing so, the advisor not only provides some much-needed peace-of-mind for the client but more importantly enhances his/her working relationship with the next generation as well.

Article Excerpt:

Discover five of the best client retention strategies that you can implement right away to boost client loyalty and retain more of your hard-earned...

TAG Advisory Services's Insight

When it comes to retaining clients, there are a few tips that should always be at the forefront of an advisor’s mind. Once an advisor has established his/her client base, they may fall into the trap of becoming complacent by assuming that the client’s loyalties won’t be swayed. In reality, that’s not how true loyalty is built, and there is much more work that goes into maintaining a lasting client-advisor relationship. Because financial services are such a relationship-driven industry, going out of your way to share personal values, be transparent, and maintain regular communication while periodically stopping to gauge your client’s satisfaction through a series of checklists will take you far in building the long-term trust and loyalty that is the cornerstone of your business.

Article Excerpt:

The coming great wealth transfer of $30 trillion in assets from baby boomers to their heirs is creating challenges for clients and advisors...

TAG Advisory Services's Insight

As the Baby Boomer generation continues to retire and pass their wealth down to their next of kin, the financial advisory industry must also prepare for a major transition of its own.

Since advisors often focus their attention on the main breadwinner in a family, when that key member passes away, the relationship with the rest of the family tends to fall apart as well. In fact, studies have shown that over 66% of children fire their parents’ financial advisors after inheriting wealth.

Ultimately, all successful client-advisor relationships are built on trust, so when advisors neglect to build a rapport with other members of their client’s family, it becomes incredibly difficult to retain that family’s business when the original client passes on. A few ways to accomplish this include involving the family’s children into financial discussions from an early age or encouraging their clients to bring their children into meetings with advisors when the time is right. An MFS client survey showed that 79% of respondents said such discussions were “extremely/very helpful” in retaining their parents' advisors.

By initiating these types of discussions from an early age, advisors stand a better chance of reducing the likelihood of client defection when the wealth transfer finally occurs, thereby maintaining generational client bonds.

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