4 Important Tips for Seamless Succession Planning

According to a recent study from Cerulli Associates, more than 40 percent of U.S.-based financial advisors are over the age of 55. Many of them have yet to make a plan for what their businesses will look like after they retire.

Needless to say, business succession planning can be a touchy subject, but it is one that advisory businesses need to address before it’s too late, said Matt Otto of HighTower’s The Otto Group and Broadstone’s Chris Czarnecki during their joint panel at the 2019 HighTower Advisor Summit. Moderated by Summit emcee David Young, the panel focused on the steps Otto and Czarnecki have taken in planning the future of their own businesses.

Here were their five biggest tips for advisors making their own business succession plans:

Put your culture down on paper

In order to preserve the positive aspects of your firm’s culture for future generations, you must first be able to define what makes it so special, said Otto.

“I think drafting the succession plan is the most important place to start,” he said. “But you also need to take a step back and consider what your culture looks like today. Mapping out your culture and having it clearly defined on paper, so everyone understands it, is crucial for building a successful succession plan.”

Communication is key

One of the biggest reasons many advisors avoid thinking about succession planning? These are awkward conversations to have! Advisor-founders spend their entire careers building up their businesses, and the idea that someone else will one day be in charge of their creation is often a hard pill to swallow.

“I mean, it’s an emotional topic,” said Czarnecki. “Frankly, it’s not always comfortable to talk about, because it means someone who has been a dominant figure in the business is going to eventually be making a major life change. You need to think about what’s good for the business, sure, but you also need to think about what’s good for the founder.”

Czarnecki said the key to having these tough conversations is keeping communication open from the very beginning of the process. The more you talk about it, the easier it gets, and the more time you will have to work out the kinks in the plan and help ensure everyone is happy with the future direction of the business.

Build out your team

Successful advisory practices are built on culture and collaboration, not on the personality or talents of one singular person. When advisor-founders retire, they need to have a team in place that can carry on their legacies without issue, and this is something they should be thinking about building long before their time at the helm is up.

“One of the most gratifying things to me is watching tasks be seamlessly completed without my involvement,” said Czarnecki. “Knowing there is a whole process in place that can happen in the background: that’s when you know you’ve really built an organization. It’s the coolest thing to me when someone comes by to say, ‘Hey, someone called about this thing, and I took care of it!’ If things can get done without your input, that means you’ve built a bench of talented people that can sustain the organization into the future.”

Staff for expected growth, change and culture

“If you’re planning on being a $2 billion practice in five years, you have to think and act that way now,” said Czarnecki.

Without thinking into the future when it comes to staffing, you could be left overwhelmed and underprepared when your business’s dreams of expansion come true.

“To me, it’s important to create an environment where each team member feels like they have a powerful voice,” said Otto. “Building up a team where everyone has a voice is crucial to building a team you can learn from and grow with.”

For Otto and Czarnecki, hiring based on credentials alone is a no-go. Both make use of personality and culture-fit tests, and both businesses are better for it.

“Ultimately, the people we hire who were culturally aligned with us from the beginning have worked out infinitely better than we ever could have predicted,” said Czarnecki.

To learn more about how your advisory business can benefit from joining HighTower, email us at advisorsuccess@hightoweradvisors.com.