The Elements

By Andrea Schlapia   |   October 9, 2012

PASSING THE TORCH – PART II Your Successful Succession Strategy  

Categories: Blog, Strategic Planning, Succession Plan

Passing The Torch

Advisors specialize in helping clients prepare for life events such as retirement, and counsel them on the prerequisites for reaching their goals.  Having said that, why don’t the 42% of advisors who are within two years of transitioning, have their own financial plan in place?*

Align your succession plan with the long-term strategy of your firm, and , it will become an integral part of your business practice.  Part I of Succession Planning, briefly outlined the succession strategy; below is an in depth review of the key factors.

EVALUATE THE PRACTICE, DEFINE YOUR GOALS, DESIGN A PLAN

There are multiple ways of passing your practice to others.  The ideal time to coordinate your transition is 10 years; strategy options will decline the longer you wait to implement your succession plan.  There will most likely be changes and adjustments along the way regardless of your time frame and pre-planning; stay flexible in the execution of your plan.

  • Start early as you see your business value increase
  • Use a SWOT analysis to define the structure and goals of your practice by outlining the strengths, weaknesses, opportunities and threats
  • Use Ironstone’s Fundamental 4™ to shape your business, ideas and solutions
  • Identify the reputation and legacy you want your practice to establish
  • Identify key roles that require continuity and are essential to your firm’s success
  • Establish a short-term/emergency and long-term succession time-line; initial planning to closing the sale
  • Outline 10, 5, and 1-year milestones to achieve, as well as potential milestones following the transition

IDENTIFY THE NATURE OF THE SALE 

Internal

  • Sell your ownership to one or more partner(s) of the practice
  • Sell your ownership to a junior partner who was hired specifically for succession
  • Transfer your practice to a relative

External

  • Sell your practice to a strategic partner in exchange for ownership in the larger firm
  • Sell your practice to a wealth management firm e.g. bank

PREPARE THE PRACTICE FOR TRANSFER

Include your CPA and attorney in this process to council your decisions and efforts as you outline the formalities of the transfer.  Build a succession plan that incorporates events that occur in your practice.  Some areas of focus include:

  • Determine the value of your practice and cultivate these drivers of valuation:  Adequate time for succession, client retention, reliable earnings, normalized earnings and AUM/REV
  • Assess your client segmentations
  • Restructure your organization design if necessary
  • Review and prepare formal documents such as financial statements, business plan, marketing plan, etc.
  • Upgrade your technology platform
  • Hire potential successors or search for external buyers
  • Finalize legalities – non-disclosure/non-solicit agreements, negotiations, possible discounts on sales, corporate structure
  • Create equity participation plans for employees
  • Prepare for mergers, acquisitions, financing
  • Launch new market penetration initiatives
  • Organize transfer of assets

PREPARE YOURSELF FOR TRANSFER

In order to transition from your practice you need to solidify a sense of purpose beyond the transition.  This will eliminate your fears and will sustain your emotional commitment to the transition.

  • Define your role in the practice after the transition– e.g. short-term advisor role, ambassador role that provides emotional connections to long-term relationships
  • Define your personal goals, beyond the practice, by developing interests and securing financial resources independent of your business

PREPARE YOUR TEAM FOR TRANSFER

Communicate the changes to the entire team, as well as memorialize processes and systems that are repeatable and no longer require your supervision  This will create a seamless transition and increase the value of your practice.

  • Delegate your responsibilities to your entire team to reduce the burden on one or two people
  • Collaborate with your team and incorporate their contributions to secure their “buy-in” of the changes
  • Create and document processes, policies, procedures and systems to create confidence for your clients and future buyer(s)
  • Define and refine team roles, responsibilities and job descriptions

CHOOSE YOUR SUCCESSOR(S)

A common misconception is that a succession plan involves only finding a successor for the business owner; however, there is often more than just one role that requires continuity and is essential to the success and growth of your practice.  There is also much debate surrounding the topic of whether you should inform team members if they are in the talent pool for advancement to leadership positions.

In Ironstone’s research, we have found the answer to be quite clear…….Tell Them! This will not only motivate team members to aspire to be a part of the talent pool, it will safeguard you from prematurely losing your top performers to the competition.

  • Determine criteria for welcoming new leadership – e.g. leadership/management ability, cultural fit, shared firm vision
  • Assess personality types and preferences to understand your workforce potential and identify your high-potential employees
  • Be open to having multiple successors fill the shoes of a key role – e.g. changing from a single advisor to a board or committee

DEVELOPMENT, REFINEMENT AND PLANNING

The research is shocking – only 26% of firms have processes in place to develop internal talent.** Defining and designing career paths within your business are essential to combat unnecessary employee turnover.  This process involves mentoring and coaching to prepare high-potential team members for advancement.

  • Continuous evaluation of your current talent will help you recruit and promote from within
  • Develop pools of talent who are at various stages of readiness for promotion or new assignments
  • Support learning through relevant work experiences and daily assignments
  • Identify and develop pools of talent for all critical areas in your organization, not just leadership

PREPARE YOUR CLIENTS FOR TRANSFER

Preparing your clients for the transfer is critical.  You must create confidence for your clients with the new advisor(s) and that they believe their needs and interests are in good hands.  The key is to make your absence a farewell rather than a loss to the business to ensure clients will stay with you through your transition.

  • Develop deep relationships and a communication plan that reaches clients, stakeholders and business partners
  • Inform clients of the succession plan, introduce them to the successors, transfer the relationship
  • Communicate any changes in client account structure, point person, etc.
  • Encourage and ensure that all interaction gravitates to the new leadership before your transition is complete.

IN CONCLUSION

Your successors are at the heart of your achievement!  Groom your practice and invest in successors through realistic developmental expectations of high performing leaders.  At each interval of your plan and your transition, stay realistic and take time to make necessary modifications.  A refined process will secure the chances of exiting with a prosperous outcome for all parties involved.

Strategic business planning includes succession planning.  Creating value for your firm that you can later sell will require that you look at your core values, vision and mission.

Ironstone will assist you with each stage of succession planning and provide tactical approaches to strategic planning, operational and human capital fundamentals that are vital components of successful succession planning.

*2012 AdvisorOne, **2012 IN Adviser Solutions Succession Planning Study

• Email us at info@ironstonehq.com
• Call our office at 800-917-8020


Andrea Schlapia
Organizational Development and Human Capital

Andrea Schlapia, RCC™, HCS, sHRBP, is the Founder and CEO of Ironstone, which represents the culmination of her 20+ year career within the financial services industry. Her experience began as a financial advisor evolving into a consultant coach for advisors entering the field. This ignited her passion to support others through learning and development of best practices in order to achieve substantial results. To this end, she followed her desire into positions of senior-level practice management specialists for Dreyfus, Prudential, and DWS Investments prior to the realization of Ironstone.  Andrea’s focus is on practice management strategies to enhance and improve both business and personal life.

Andrea identifies 4 key performance areas known as the Fundamental 4™, which are required to design, develop, and sustain a successful business. Through coaching sessions and speaking engagements, she captivates her audience with interactive, high-energy presentations which are built with “how-to” strategies resulting in real-world implementation for significant impact. Andrea has been featured in multiple publications and audio broadcasts as a specialist and distinguished spokeswoman in the financial industry.

Learn more...

Leave us a comment, get our blog posts delivered by email, or email the Ironstone Team.

We would love to hear from you!

  • This field is for validation purposes and should be left unchanged.

Contributors

Andrea Schlapia
Organizational Development and Human Capital
Connie Deianni
Mentoring and Employee Engagement
Guest Blogger
Practice Management
Dr. Heidi Maston
Organizational and Educational Leadership
Joe Kuhns
Strategic Partner
Judith Bowman
Business Protocol
Laura Garfield
Idea Decanter Co-Founder
Marsha Schechtman
Strategic Partner
Mighty 8th Media
Strategic Partner
Nicole Anglace
Special Projects
Ruthann P. Lacey, P.C.
Elder and Special Needs Law
 Scott D. Calhoun
Legal Counsel
Sharon Gottula
Idea Decanter Co-Founder
TailorMade
Strategic Partner
Ironstone
Practice Management
close

Contact

Thanks for your inquiry!

We will be contacting you shortly. In the meantime please feel free to connect with us on social media and explore our blog posts.

Ironstone understands the importance of protecting your privacy. We will not sell, rent or give your name or address to anyone.

Latest Blog Article

Business Dining Tips: How to Wine and Dine Your Way to the Deal 

Advisors and business professionals at all levels have long-held the notion that wooing prospective new hires and closing a deal over lunch is extremely effective. However, I am thrilled to tell you there is now evidence to support this belief, according to Lakshmi Balachandra, a Harvard fellow. Inside the Dining Research Ms. Balachandra’s work subjected […]

Read More>