A Dually-Focused Succession Planning Approach Adds Authenticity For Advisors Working With Business-Owning Clients

Friday, March 23, 2012 08:56
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A Dually-Focused Succession Planning Approach Adds Authenticity For Advisors Working With Business-Owning Clients

Tags: business planning | business strategy | client communications | practice management

Advisors who put their own succession plans into place build trust with clients more authentically. They have put themselves through the same exercise they are asking their clients to do. Last week we started a discussion about succession planning, listing the ‘Top Ten’ must-dos when developing a succession plan. This week, we’re starting to address each item on that list, one by one.

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Taking the Top Ten List in true Letterman fashion, we’ll start with #10:
 
10. A succession plan must be written. Absolutely. Without question. For legal and umpteen other reasons.
 
Failure to write a plan down is failure to plan. It can cause legal turmoil, family turmoil, and can actually result in the demise of the business. Even if the plan is challenged, there is a solid, written document which can be used to defend the plan.
 
Advisors are subject to the same succession issues as their business-owning clients. When advisors come to grips with this fact, they begin to understand why clients fail to plan, too.   
It’s not that they don’t know how important it is.
 
Here are a few reasons both clients and advisors are reticent to start the succession planning process:
 
1)      Succession may mean a death has occurred; usually, their own! It’s tough to talk about our own mortality.
 
2)      It can be hard to find a successor within the family or within an advisory partnership in whom the founder or advisor has confidence to carry on his or her vision.
 
3)      In families, the succession process may start a squabble among family members who have worked in the business and those only receive dividends.
 
4)      With advisors, there may be junior partners who wish to have a stake when other partners have more experience and longevity on the team.
 
5)      Putting anything in written form makes it more real. It also makes it easier to be challenged.
 
The process of writing a plan helps to clarify the vision and builds sustainability. The first step—getting clients to take action—is the hardest. Storytelling is an excellent tool for this.
 
Telling the story of the business—and of the family—can remind the founder or leader what he or she has accomplished over their lifetimes. This makes it more palatable to start the conversation about the kind of legacy the founder wishes to leave. This positions a written succession plan as a support document for leaving a legacy as well as for estate planning.
 
Advisors may feel as much pride and emotional connection to their businesses as families do to theirs. An advisor who has told his or her own story or, better yet, recorded that story in written form, automatically creates a heritage.
 
People get connected through a common heritage. That makes it easier to identify the best person to take over the business. And that’s when it becomes easier to write things down.
Written guidelines provide structure. One of the most difficult things about succession is the transition part. When a plan is written in advance of the transition, the entire business or family has a structure within which to accomplish the prioritized, written set of goals which have been laid out.
 
Written plans should include the following:
 
1)      Qualifications, expectations, and compensation for successors
2)      A way to benchmark success
3)      A back-up emergency plan
4)      Guidelines for transition
5)      The names and contact information for all advisors who should be involved in the transition process
 
Copies of the plan should be kept in multiple forms in very secure places. An encrypted online vault makes accessing the plan easy for those with permissioned access. Advisors who are designated to help facilitate the transition can collaborate within a much more efficient—and less painful—process.
 
Back-up hard drives should be kept in a lock-box at a bank. Another copy should be kept in a safe in your house. Writing the plan is Step #10. Stay tuned for Step #9 next week.

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