Succession planning: Building the future of your practice

By Bryson Milley

We often tell our clients to "begin with the end in mind" when it comes to their retirement or insurance planning. This leads to questions like, “How do you want your retirement to look?” or “Have you considered what protections you need for the future?”

The same is true for your practice.

Transitioning a business takes time and intentional steps over many years. I have both been on the receiving end of a business transition and have built a plan for my own exit strategy in the not-too-distant future.

Creating a clear picture of what you are hoping to accomplish by your transition, holding an objective evaluation of our business, building the next generation of talent, and preparing clients for your exit is necessary to establish an actionable succession plan.

Envisioning the future

Before you can start making decisions about your transition, you must have a vision of what you want the future to look like. For example, some advisors want to continue their work and be involved on a part-time basis.

Others want to continue working in the same capacity as long as possible, while some practice leaders have a clear retirement goal in mind. For instance, my goal was to build toward a business where I was not the central force – I wanted to both build up young advisors while also building a future where I can retire and focus on time with family and chasing other passions.

Your ideal future should then guide your decisions – who you hire, the tools you implement to enhance your work, client retention strategies and more.

Objective evaluation

The next step is then to evaluate your business – revenue, potential growth and your clients’ well-being – as objectively as possible. Ask yourself, “What would the business look like without you in it?” and “How will revenue remain steady after your departure?”

Keep in mind that you are not only selling yourself at this point. The potential successor looking to invest in the business you created needs to understand what value they get out of taking on the practice.

Consider how the new owner will be able to retain business with your existing clients as well as build the potential revenue over time. If you are to leave, create an action plan to keep your staff and clients on board through the succession plan’s execution.

Building the next generation

To retire or reduce your presence in the business, you must identify the people who will lead after your departure. This is not a decision that can be made at the last minute when you are burnt out and itching to pass the work along.

Identifying a suitable leader is a multi-year process (average five to seven years) that requires attention to detail and intentional preparation. A slow transition creates a higher success rate and supports clients as they transition from you to the new leader.

Something else to consider is to avoid promoting someone who works exactly like you. The best strategy is finding someone capable of building trust and growing the business in their own way.

In my case, I began identifying multiple associate advisors that I could integrate into my business over time. I chose this path as I am passionate about using my experiences to mentor up-and-coming advisors. While I was not ready to retire when I initially hired them, I knew that over time I would dwindle in my availability as I took on more involvement in other areas like MDRT, hobbies and my family.

Just as I experienced when I was the successor of a business, I am building my young colleagues’ confidence through hands-on experience that only time could provide. Allowing them to “fail forward” and being available to provide advice took time but has great reward. Slowly including them in client calls and meetings and cultivating relationships with existing clients reduces stress on both the practice and the clients in transitions.

Preparing clients for your exit

Now that you have thought through what you want, what the business can handle and how to build up your successors, you now need to think about your clients. Use the knowledge from your tenure to pair clients with an associate advisor whose skills and personality match their needs.

This is one of the reasons a slow transition is best – your clients want to know that they are in safe hands after your departure. Cultivating your successors’ abilities to connect with existing clients leads you to a position where you can retire knowing clients are in good hands.

Developing new, long-term, advisor-client relationships helps alleviate some of the emotional exhaustion of retirement. You now can rest easy knowing the business you worked hard to cultivate and the clients you care for have bright futures ahead.

Succession planning requires a long-term strategy based on how you want to exit the business. Advisors who begin with a clear vision for retirement, intentionally develop future talent, build a business that generates value beyond one individual and gradually transition client relationships put themselves in the strongest position for success.

While it can be difficult to think of leaving the business you have built, it is no different than the advice we give our own clients: think with the end in mind and start building your future now.

About the MDRT member
Bryson Milley, CIM, CFP is a 25-year MDRT member, achieving 17 Court of the Table and 11 Top of the Table honors. Milley is a financial advisor and portfolio manager at RGF Integrated Wealth Management. He is especially passionate about building financial plans that follow closely with clients’ lifestyle and the ups and downs they experience through life and supporting the next generation of financial advisors through mentorship.