Succession planning as a growth strategy

Gabriel Garcia, Managing Director, Advisor Client Experience

E*TRADE Advisor Services

Find out how firms can confront the unexpected and still hit it out of the ballpark

Succession planning isn’t just a break-the-glass-in-case-of-emergency tool: It’s about creating continuity for clients and employees, building a business for the future, and paving the way for an intentional transition—while also preparing for the unexpected.

Reality checks require courage

It’s never too early to begin thinking about succession. RIAs are, on average, in their mid-50s, with many in their 60s and 70s—the time of life when retirement plans begin to crystalize.1 But even though roughly 40% of advisors will retire in the next 10 years, many aren’t following their own financial-planning advice when it comes to succession. 

An E*TRADE Advisor Services survey found that only 27% of advisors would be prepared if they had to put their succession plan into action today.2 Similarly, a survey by the Financial Planning Association (FPA) and Janus Henderson Investors found that only 11% of advisors had retirement plans in place for themselves.3

Planning for the eventuality that we’ll one day step down takes guts—but as the coronavirus pandemic underscores, it needs to be done. Rather than taking a gloomy view, though, think of succession planning less as a sunset and more as a way to protect your clients and ensure your business and legacy endure.

Succession planning becomes client service

Advisors are in the business of trust. Why should a client continue to put their faith in someone if there’s no plan to protect their best interests in the event that advisor isn’t available to serve them personally? A succession plan shows your clients that you’ve made sure their financial wellness is protected even if your firm goes through a transition. 

Also, it’s more than just a part of your business continuity efforts—it’s a growth strategy. It demonstrates client-centricity and that your firm is poised to provide uninterrupted service, no matter what.

Planning boosts teamwork

As much as clients are looking for increased reassurance, your team members and staff are, too. Show your team that your firm is in it for the long haul—and they’re part of that plan. 

FPA and Janus Henderson found that team members worry when there’s no succession plan in place, with 96% perceiving a risk of not having a plan and 88% feeling a plan—or lack of one—meaningfully affects them.3

Especially in a remote environment, your team needs to know how your business is set up to handle transitions, if their jobs will continue to exist, and whether they can grow within your firm. Include your team in planning, development, and problem solving. It’s more important now than ever—working remotely underscores the need for increased communication with your team.

Make sure to include up-and-coming advisors in discovery meetings and day-to-day check-ins with clients. Give them the freedom to become familiar faces and voices—loop them in on video calls, emails, and online messaging. Take the lead by reaching out to them and initiating conversations about the future of the business. 

Take action now

There’s no predicting the future, but that doesn’t mean you shouldn’t prepare for it. Follow the advice you would give your own clients: If not for yourself, make a succession plan for the best interests of your clients and team members. 

The good news is that the difficult decisions you make regarding succession planning do much more than clarify how you will transition leadership. Your succession plan shows your clients and team members that that you’re not only capable of facing the increased risks of the current environment, but you’re able to lead them through to a more secure future.

Contact us to learn more about E*TRADE Advisor Services, and follow us on Twitter (@etrade4rias) and LinkedIn for the latest advisor insights.

A version of this article first appeared in Advisor Perspectives.

  1. CNBC, “Financial advisors need succession plan to benefit clients and firm,” Oct. 29, 2019
  2. E*TRADE Advisor Services, data collected March 10 to March 19, 2020, among a convenience sample of 225 independent registered investment advisors.
  3. Financial Planning Association (FPA), “The Succession Challenge,” 2018.

Looking to expand your knowledge?