How a Succession Plan is a Growth Strategy

Many advisors look at traditional marketing techniques as key strategies for driving growth. Yet there is one powerful strategy that many advisors overlook, and that is having a succession plan. Believe it or not, a well-written succession plan that is communicated to your team and clients signals to your staff and the market that you’re building a business that will last beyond you. This has a tremendous impact on your staff and your clients and on the overall growth of your practice.

The Impact on Staff

The primary goal of a succession plan is to give your heirs and employees a roadmap to follow in the event of your death or disability. Knowing that the business will continue no matter what creates a sense of security for staff. It also motivates team members named as successors in the succession plan to not only preserve the business, but to grow equity for themselves and the practice. They will work harder and make significant investments of time and even capital into the practice because they know it will pay off down the line.

The Impact on Clients and Referrals

One step many advisors overlook in succession planning is communicating it to clients. When clients know that you have thought about all the worst-case scenarios and have plans in place to make sure that they are cared for no matter what happens, they are more likely to not only stay but also to refer future generations. They want to know that they are building a long-term relationship that extends beyond your tenure as their advisor. Especially if you want to bring on their heirs as clients. Actively communicate your succession plan to centers of influence as well, as they too want to know that you will take care of their clients’ long-term needs and that they will not experience an unexpected disruption or loss of continuity in the management of their assets.

Impact on Overall Growth

In our experience, advisors who have a succession plan see steady growth. This is especially true if they have named a junior advisor or partner as a successor. Advisors without a succession plan often hit a point where their practice value peaks. As clients age out and pass on, they draw down or transfer assets out of the advisor’s care and to an heir who is not a client. This decline in assets leads to a decline in overall practice value. So, when the advisor goes to sell, they find that their practice is worth less than they believed and receive less equity at retirement than they had hoped. On the other hand, advisors with a succession plan often see tremendous growth, especially if they implement phased successions. The practice value increases as the practice grows revenue, resulting in a higher payout at retirement.

So, whether you plan on maintaining a solo practice or have a team practice, a succession plan is a critical growth strategy you should employ. Not only will it create stability in your practice now, but it will also lead to a better payday when you are finally ready to retire.