The Dangerous Gap in Succession Planning

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Succession planning is a mainstay of the work advisors do with their clients, whether that’s incorporating estate planning considerations into a long-range financial plan, or a more complicated exit strategy and succession plan for a business owner. Yet, advisors too often fail to follow their advice when it comes their businesses. A study a few years back co-commissioned by the Financial Planning Association found that almost three-quarters of advisors lacked a formal succession plan.

I doubt the numbers are different today.

It’s something all advisors, and really any business owner, should implement. I’m only 49 years old and like to think I look younger, but just the other day a prospective client asked, “What is there to this firm besides you?” It’s a fair question to ask and one a solo practitioner might be hard pressed to answer. To be a business, a company has to have a life of its own and continue functioning in the absence of the founder or top executive. I may be our firm’s CEO and CIO, but I have competent and experienced partners who can step in should anything happen to me. We have contingency plans.

My father, who is now past 80 and still working, never thought about succession until he was around 60 and clients started asking when he was planning to retire. His answer at that point was a pointed, “never,” but it got him thinking.