Succession Planning Success
At least four succession contingencies exist that every financial advisor should plan for: Death, disability, career change, and retirement. All these circumstances have several things in common when planning for succession.
First, you should begin with a value. How much is your practice worth? Depending upon your mix of products and services, valuations can fluctuate. Consult with firms that specialize in business valuations to get a better understanding of your practice’s value. The typical valuation formulas will vary predicated on overall book-of-business and the five most recent years of experience.
How much value can you bring to the business as a “transition” asset to make sure the succession plan goes smoothly? Your ongoing involvement, part-time to full-time, may be anywhere from a 6-month to two-year process.
Formalize the succession plan in writing and make it legally binding. Review the plan at least annually to assess the valuations and confirm the timetables are agreeable to all parties and interests.
Inform your clients and prospects that this is a very important part of your working relationship. If for any reason you go down… they stay up!