The Importance of Taking Time to Find the Right Successor

November 10, 2020

Financial advisors help their clients plan for their financial future every day — yet many advisors do not do the same for themselves.

According to Cerulli Associates, a wave of advisors are set to begin retiring in 2021, yet 22 percent are unsure of their succession plan, and developing or enhancing a succession plan isn’t a top priority for them.

“The industry is on the precipice of a succession planning crisis,” says David DeVoe, founder and CEO of DeVoe & Company. According to DeVoe & Company’s June 2020 RIA Next Gen Transitions Survey, more than half of the 118 RIAs surveyed responded that a transition from founders to the next generation would be “bumpy” or worse and 13 percent said it would be a severe challenge.

Why are advisors lagging in creating their succession plans? Even though they understand the importance of having a succession plan, many don’t know where to start.

The Importance of Compatibility in a Successor

There are many things you should consider when selling your practice, such as deciding the time frame for exiting your business, evaluating your book of business, and defining the pay structure. One of the most important things to consider when succession planning? Finding the right buyer.

It can be hard to find a successor who shares your values, embraces similar financial tactics, and has the same relationship and rapport with clients the same way that you did. This is an issue that our co-founder Bridget Grimes addressed in InsuranceNewsNet.com. “I have seen other RIAs buy retiring books where the selling advisor did not have the same investment philosophy as the buying firm,” said Bridget Grimes in the article.

Too many retiring advisors simply want to sell their business, collect their payout, and then assure their clients that they are in good hands. “Unless it’s a like-minded investment philosophy — and I’ve run into a completely different approach between a retiring advisor and an incoming advisor — I don’t know if the clients end up staying,” Grimes said.

Explore Your Succession Planning Options with Equita

It can be difficult finding the right successor. By being part of a community like Equita Financial Network, it will be easier to find someone who has the same values and investment philosophy as you do. If you’d like help identifying succession planning options, reach out to our team today.

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