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Business Succession Planning for Financial Professionals

Business Succession Planning for Financial Professionals

August 15, 2023

Just like the adage about the cobbler’s children going without shoes, many financial professionals who recommend succession plans for their clients lack a succession plan for themselves. A recent white paper by the Financial Planning Association revealed that 27% have a succession plan. This situation may leave heirs and business associates scrambling to put the pieces together in an emergency. 1

What can financial professionals do to move their business succession planning forward?

Identify Someone To Take Over

Succession plans should have a clear chain of command, identifying someone in the workforce who is able and willing to take over running the advising practice, at least temporarily.

Though you may not want to make any promises or withhold any chances for advancement—for example, making an executive’s bonus contingent on heading a succession process that may never come to fruition—it is important to have these conversations. These discussions help determine who is interested in taking over your responsibilities and who would prefer to remain in their current role. If no one in your organization is willing to step into this role, it is time to review your network of external contacts to see who may be available as a surrogate.

Put Your Plan in Writing

Having a written succession plan, with the parties identified and steps clearly outlined, is one of the simplest ways to avoid creating confusion. This written plan helps avoid misunderstandings if the worst should happen and someone has to take over in an emergency. Ideally, your plan should include the following:

· Any processes or workflows that are necessary for your business to continue functioning.

· An updated customer relations management (CRM) system that includes notes, strategies, and other key client information.

One of the biggest mistakes many financial professionals make is keeping this information only in their memory, potentially leaving any successors without crucial data they need to step into a leadership role.

Value Your Business

If you lack a good succession plan, it may be far harder to value your company accurately. On the other hand, building a successful succession plan often requires a rough estimation of the business’s value. Value estimation is useful if you hope to pass your business down to your heirs while managing estate-related taxes. In this respect, creating a succession plan may help you get a better idea of your business’s value while simultaneously increasing or, at minimum, stabilizing its value.

Creating a succession plan may require you to think through your business’s critical systems and processes, potentially even revealing changes that may improve how your company operates today.

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy. 1

This article was prepared by WriterAccess.

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