As a financial advisor, you regularly help your clients build responsible plans for their retirement or for transitioning away from their business, even if they feel that it's too early to start thinking about retirement.

    Yet when it comes to their own succession planning, shockingly few financial advisors devote an equivalent amount of time and care to their own futures. In fact, according to the Financial Planning Association, nearly three-quarters of financial advisors lack a formal succession plan.


    Building a succession plan is a lot like planting a tree—the best time to do it was years ago, and the second-best time is now. The first step towards planting that seed is to understand the benefits of succession planning and the key factors that contribute to success.

    What's the First Step?

    After deciding to build out their succession plan, the first step for financial advisors is to determine what their general approach will be. This means choosing between an external sale or an internal transition.

    External Sales

    Some financial advisors may be of the opinion that they’ll simply make an external sale when it comes time to transition into retirement. This approach is faster, requires less planning, and may be the right move for some. However, an external sale does come with some drawbacks:

    A lack of control

    You’ll typically have to work with the buyer to determine the nature and pace of the sale. If you’re interested in a flexible, gradual transition, then an external sale may not be appropriate.

    A lack of confidence

    Your clients and employees won’t be familiar with the new buyer and their business model. They may wonder whether the reasons why they’ve decided to collaborate with you still apply under the new ownership.

    A lack of revenue

    Often, an external sale will net you a portion of your business’s value on closing, with an earnout in the form of a percentage of the practice’s yearly revenue. Because you don’t get to choose who manages your practice after you leave, your successor may be less effective at running the business than you would have hoped for.

    Moreover, selling your practice to an external party still requires succession planning—it’s faster and easier than planning for an internal successor, but there are still plenty of moving parts to consider.

    Internal Transitions


    Instead, the majority of financial advisors will want to transition their practice to an internally identified successor. Identifying this individual early and building a succession plan for them comes with a host of benefits:

    Retirement on your terms

    So long as you feel up to the task, you can still be involved in your practice’s operations and long-term strategy. As you transition your responsibilities onto your designated successor, you can work fewer days per week; oversee select, but critical, operations; or meet regularly with close clients to discuss their financial plans.

    Control over your legacy

    For advisors who have spent decades growing their practice, wanting to see it thrive well into the future is a perfectly natural impulse. Transitioning to an internal successor gives you the opportunity to select and vet the individual you believe will be most effective at guiding the practice in the future.

    Business continuity

    Both your clients and employees will rest easier knowing that someone they have met or could meet will be taking over the practice after your retirement. Clients and employees alike are at your practice because of the way you do things; they’ll want to know that your successor is steeped in the same institutional culture.

    Key Factors to Consider when Developing Your Succession Plan

    1. Don’t Wait

    Realistically, executing on a succession plan can take years—sometimes as many as five or ten. Not only do you need to provide enough time for the various stages of your plan to come to fruition, but it also must be acknowledged that the unexpected happens. 


    People get sick, injured, or experience sudden life changes that upend their envisioned future. (As financial advisors, few understand this fact as well as we do.) At the very least, having a plan in place points your practice’s stakeholders in the right direction should you not be present to do so yourself.

    2. Define What Makes Your Successor the Right Person

    Regardless of whether you have an individual in mind, it’s a good idea to determine what skill set your successor will need:

    • Do they need to be a talented manager of people?
    • How strong are they at building client relationships?
    • Should they have brought in a certain amount of assets to the business?
    • Can they handle P&L responsibility?


    The answers to these questions shouldn’t just rest on speculation. As your candidate or candidates advance in your practice, they should be tested and mentored in the domains that will make them a successful steward of your legacy.

    3. Define the Financial Mechanism of Succession

    Once you’ve settled on an individual to be your successor, make sure there is a mutually agreed-upon mechanism for transferring ownership (and the corresponding responsibilities) to that individual. 

    It could be that an employee stock ownership plan makes the most sense, or maybe you’ll set up a fund to save a portion of the junior advisor’s salary until they can purchase equity. Whatever the case, it’s important to make this mechanism transparent and amenable to both yourself and your successor.

    4. Be Clear about Your Plan

    Ideally, your successor will be committed to the practice. But people’s minds change, and if you don’t communicate what a successor's role is in your plan and what the timeline is, they may move on to expand their career outside of the context of your practice.

    Make sure your successor understands:

    • How they’ll eventually acquire ownership of your practice,
    • What responsibilities they’ll be expected to fulfill,
    • What timeline in which they’ll take these responsibilities,
    • What you’ll be doing as retirement approaches (whatever retirement looks like for you),
    • What level of performance they’ll be expected to meet, and so on.

    Keeping communication channels open is key to ensuring transparency. This way, your successor will feel involved and know that they have a stake in your practice and its future.

    5. Involve Succession Consultants Early

    The benefits of succession planning are significant, but in order to realize the full scope of a well-thought-out succession plan, it’s best to involve consultants early and often in the process. After all, you may only experience the execution of a single succession plan in your career—dedicated consultants will have seen numerous such plans and will be better equipped to identify and overcome challenges down the road.


    Whether you’ve begun to think about succession planning close to your target retirement or early on, don’t hesitate to contact the team at AssetMark to discuss the next steps for you, your practice, and your successor.

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    AssetMark is a leading provider of extensive wealth management and technology solutions that help financial advisors meet the ever-changing needs of their clients and businesses.


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