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Succession Planning: 10 Nonlegal Questions You Must Ask

To make a successful plan, financial professionals need to be prepared for the hard questions to get the right answers.

February 19, 2024 - A key element of financial advice is planning for the future. You’ve likely had dozens, if not hundreds, of conversations with your clients about what they want in the near-term and distant future, and how their financial assets can support that plan. But have you put the same thought and analysis into succession planning for your firm?

A recent survey by J.D. Power found that the average age of financial professionals in the U.S. is 56, and 20% said that they’re five years or less from retirement.1 Another study found that more than $12 trillion in assets will turn over in the coming decade due to retirements among financial professionals, yet 25% of financial professionals don’t have a formal succession plan in place.2

There’s more to think about than retirement. Like anyone, financial professionals can face unexpected circumstances like an injury, illness or unexpected death that will reshape their firm's ownership structure. A succession plan can help ensure that your firm can succeed when you’re no longer there.

Successful succession planning has many parts. The process begins with asking the right questions and finding the best and most appropriate answers for you and those important to you. The following 10, nonlegal questions will help you get started on your succession planning journey.


When answering these questions, please remember there is no right or wrong response. The correct answer is the one that best applies to your unique professional and personal needs:

  1. Do you have an out-of-office plan?
  2. Do you have an “if something happens to me” letter ready to be sent to your clients? (Refer to this Sample Succession Letter for ideas on what information to include.)
  3. What does your age have to do with your succession plan?
  4. Have you asked qualified family members in writing if they would like to be considered as part of your succession plan?
  5. If a family member answers “yes” or “maybe,” what’s next?
  6. Do you have the best business model to realize the greatest value?
  7. Do you review your succession plan on a regular basis?
  8. Does your family and/or significant other know the details of your succession plan?
  9. Do you have an estimated timeline and sequence of events for implementation?
  10. Do your clients know of your succession plan?


Once you have answered each of the above questions, you should start building your succession plan.

Determine what the business is worth. Firms are usually priced as a multiple of net profits (generally measured through EBITDA). They typically sell for five to 13 times EBITDA depending on factors like the total assets under management, the total number of clients, their average age (which indicates how long they will likely stay after the deal), and growth in revenue and expenses.3 As with any large transaction, you can expect to negotiate prices. But you can shore up your firm’s financials in the years leading up to a sale by increasing revenue and decreasing expenses. Look to partner with a trusted CFA or business valuation specialist to begin this process.

Document your wishes through a written succession plan. The process may be clear in your mind, but you’ll need to ensure that everyone involved has all the information. A written succession plan answers questions about what you want for the business—who should run it, how responsibilities will break down if you’re passing it to more than one person (e.g., your adult kids), who’s critical to operations and should stay after you leave, and what your long-term wishes are.4

Identify—and train—a successor well in advance. You may have a strong candidate already in place, possibly a family member. You may have a longstanding employee with high potential. Or, in the absence of an obvious choice, you may need to hire someone specifically to fill the pipeline. Either way, you need to ensure that you overlap with this person long enough to ensure that you’re aligned on key factors like your values and vision for the firm, your client approach, investment philosophy and other intangible factors.1 Some candidates may need additional training and you can support their growth by paying for specific training programs they may need.2 Phase these people into the spotlight slowly. Make them a visible presence in client interactions. They should be a known entity to clients by the time you’re ready step down.

Consider selling. If you don’t have a succession candidate, another option is to sell the firm. The transaction could entail merging your team with another firm or simply selling your book of business. This approach offers the advantage of speed—a transaction can happen far faster than grooming someone to take over. Moreover, it could offer a quicker payout than traditional succession. A sale typically involves working with a third party to identify candidates and guide you through the process. That includes determining the proper structure for the deal—either through the sale of firm assets, an “earn-out” where you need to stay with the new entity for a period of time, or a stock sale (typically executed over time when you sell to an internal successor).2

Communicate early and actively. All businesses value their customers, but financial professionals deal with their clients in an arguably more intimate way. Conversations about money can be emotional, dealing with things like family dynamics, clients’ future aspirations and other sensitive topics. It’s built on trust, and you should avoid jeopardizing that trust. It’s important to discuss the highlights with your clients. They should have a clear sense of what’s coming and when. You should be available to answer any questions they may have throughout the transition. The tone should be one of reassurance and consistency: new faces, same superlative service. If handled well, the transition becomes a nonevent, and your client base will stay with the firm under its new leadership. In fact, communication can even be an opportunity to reinforce relationships with your clients before you leave. Again, here is a Sample Succession Letter that can help you get started.

File your succession plan with your company. It is important that you inform your home office of your succession planning efforts. Make sure you take advantage of the resources offered by your home office to help you better draft your plan. Once you have completed your succession plan, make sure to file it with your legal or compliance department for approval and provide a copy once the plan is finalized and when updates are made. 

In sum, a succession plan is a baseline requirement for financial professionals. If you have one, make sure it’s current. If you don’t, start creating one now. Remember, you should always consult a lawyer for any legal advice. In any case, you’ll be taking a big step forward to position your firm for long-term success.

Joe Buhrmann, “Client Relationships and Succession Planning,” emoneyadvisor.com, Sept. 26, 2023
Eric Grey and Leah Ryan, “Succession Planning for Financial Advisors: A Six-Step Roadmap,” Capital Group, Sept. 7, 2023.
“The Comprehensive Guide to Succession Planning for Financial Advisors,” Carson Group, May 9, 2023.
Rebecca Lane, “Succession Planning Tips for Financial Advisors,” SmartAsset, Jan. 24, 2024.

The information provided only summarizes complicated topics and does not constitute financial, legal, tax, or other professional advice. Further, the information is not all-inclusive and should not be relied upon as such.


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