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  • Writer's pictureBrian Bohnsack

Your Financial Advisor Succession Plan

Updated: Mar 22

Your Financial Advisor Business Succession Plan

As a business owner and financial advisor, it’s essential to start planning your retirement and thinking about living a work-optional lifestyle while caring for your clients and family. Your financial advisor business succession plan is critical to leaving a positive legacy.

Brian attained a bachelor’s degree in accounting, earned his FINRA series 7 and 66 securities registrations through LPL Financial, and carries life and health insurance licenses. Brian has a wide range of experience in financial services, accounting, and management. He loves working directly with his clients to help them learn more about their goals and dreams and educate them about financial planning and investing.

Succession Planning for Financial Advisors

For many financial professionals, the thought off handing off your business can seem daunting. You might be thinking that the easiest thing to do is work with a private equity firm. But there are other options.

In this article, I’ll talk cover the basics of succession planning for financial advisors and how you can create a plan that works for you and your clients.

The Four Key Reasons Succession Planning is Critical

Continuity of Client Relationships: Clients build strong relationships with their financial planners, based on trust, understanding, and shared financial goals. A well-executed succession plan ensures that these relationships remain intact even when the primary planner retires or is no longer able to work.

Business Sustainability: A financial planning practice is not just a job; it’s a business. A succession plan helps maintain the health of the business by transferring leadership and responsibility smoothly. Without a plan, the sudden absence of the planner could lead to confusion, client dissatisfaction, and financial instability.

Protecting the Planner’s Legacy: Financial planners invest years in building their reputation, expertise, and client base. A thoughtful succession plan safeguards this hard-earned legacy by ensuring that the practice’s values, philosophies, and standards continue to guide its future.

Talent Development: Succession planning encourages the professional growth of potential successors. By identifying and nurturing talent within the practice, financial planners contribute to the development of skilled professionals who can carry forward the practice’s mission

The Four Key Reasons Succession Planning is Critical

The State of Succession Planning Among Financial Advisors

The Average Age of Financial Advisors and the Growing Need for Succession Planning

The average age of financial advisors is steadily increasing, making succession planning more critical than ever. According to a J.D. Power study, the average age of a financial advisor is about 55 years old. Not only that, about one-fifth of industry professionals is 65 or older.

This demographic reality points to a growing need for younger advisors to step in as older professionals retire. The problem is exacerbated by the lack of formal succession plans in many advisory firms.

Why Most Financial Advisors Lack a Formal Succession Plan

Most financial advisors lack a formal succession plan due to the perceived complexity of the process and a focus on short-term goals. They may feel that their practice will simply sell itself when the time comes or may underestimate the time needed to develop a robust plan.

Additionally, some advisors may have difficulty letting go of the business they’ve built. However, lacking a succession plan puts the advisor, clients, and the firm at significant risk.

We don’t want you to be in that boat.

At 360 Financial, we want to make sure that you’re able to have a smooth transition from working in a profession that you love, to retiring and enjoying the next chapter.

The State of Succession Planning Among Financial Advisors

Succession Options for Financial Advisors and Independent Advisory Firms

An Overview of Succession Planning Options for Financial Advisors and Small Firms

Various options exist for financial advisors contemplating succession, including internal succession, selling to an external party, or merging with another firm. Each of these options comes with its own set of complexities and benefits.

Internal succession is often favored for its continuity, while external sales may offer a quicker exit and potentially higher valuations. Mergers can offer scale and resources but require careful integration.

Succession 360 is your customized plan to protect your life’s work, your clients, your team and family. Leverage your assets today, monetize your business for the future, and choose your timeline rather than be handcuffed to someone else’s.

The ideal succession is about protection, focus, and alignment with your life goals. Let’s discuss the timeline, income and cash flow to meet your financial needs. Then we’ll customize a plan that works best for you, your family, and your clients.

Considering Structure and Dynamics of a Financial Advisory Business with Succession Planning

When planning for succession, the structure and dynamics of your business play an essential role. The size of the firm, the skill set of existing employees, and your client base are all critical considerations. Whether you are a sole practitioner or part of a larger firm, different models will apply. Understanding these variables will help you tailor your succession plan more effectively.

Your Financial Advisor Business Succession Plan

How to Craft an Effective Succession Plan in 7 Steps

1) Identify Potential Successors

Begin by assessing the individuals within the practice who have the potential to step into leadership roles. Consider their skills, experience, commitment, and alignment with the practice’s values.

2) Consider Mentorship and Training

Once potential successors are identified, provide them with mentorship and training opportunities. This could involve allowing them to take on more responsibilities, participate in decision-making, and learn from the current planner’s experiences.

3) Plan Your Client Transition Strategy

Clients need to be informed about the succession plan well in advance. Introduce potential successors to clients gradually, ensuring that there is time to build trust and rapport. Communication is key; reassure clients that their needs will continue to be met seamlessly.

4) Take Care of Legal and Financial Considerations

Work with legal and other financial advisors to navigate the legalities and financial implications of the succession plan. This might involve updating ownership agreements, drafting buy-sell agreements, and addressing tax considerations.

5) Get Started with a Gradual Transition Period

Plan for a gradual transition period during which the you and the successor work together. This allows the successor to learn the intricacies of your practice, understand client needs, and gain confidence in their new role.

6) Consider Feedback and Do an Evaluation

Regularly assess the progress of the succession plan. Seek feedback from clients, staff members, and the successor themselves. Make adjustments as necessary to ensure the plan’s effectiveness.

7) Have an Emergency Contingency

While succession planning often revolves around planned transitions, it’s equally important to have a contingency plan for unexpected events like disability or sudden retirement. Having a contingency plan ensures that the practice can continue operating without major disruptions.

Your Financial Advisor Business Succession Plan

Key Components of a Financial Advisor Succession Plan

Elements of a Successful Succession Plan

A successful succession plan should include the following:

  1. timeline

  2. valuation methods

  3. client transition strategies

  4. legal considerations like buy-sell agreements.

  5. tax implications

  6. financing options

Additionally, it should identify potential successors, whether internal or external, and outline a training and development plan for them.

Finally, it’s crucial to involve stakeholders and communicate effectively throughout the process.

Your Financial Advisor Business Succession Plan

The Role of Business Valuation in Financial Advisor Succession Planning

Business valuation is a critical component of succession planning. It establishes the worth of your practice, which is crucial for setting sale prices and terms. Various methods exist for valuing an advisory business, such as multiples of revenue or EBITDA, and discounted cash flows.

Valuation is not just a one-time activity; it should be reviewed periodically, especially as you near the time of succession.

Developing an Internal Succession Strategy

The Importance of Internal Succession in Advisory Firms

Internal succession has the advantage of offering continuity for clients and employees. It allows the firm to maintain its culture and operating systems, thereby reducing transitional friction. However, this strategy requires identifying and developing potential successors well in advance. The selected individuals should share the firm’s vision and be capable of running the business efficiently.

Identifying and Developing Next-Generation Advisors

For internal succession to be successful, identifying and developing next-generation advisors is crucial. This involves mentoring, offering career development opportunities, and progressively delegating responsibilities. A systematic approach to this can include setting up training programs, creating a leadership track, and providing incentives for potential successors to stay and grow within the firm.

Buy-Sell Agreements and Business Continuity

How Buy-Sell Agreements Protect Business Owners

Buy-sell agreements serve as a legal framework that outlines the procedure for transferring ownership when a partner exits the business, either due to retirement, disability, or death. These agreements protect the remaining partners by establishing a predetermined price and terms for the buyout, thereby avoiding potential conflicts and ensuring business continuity.

Ensuring Business Continuity Through a Well-Thought-Out Plan

A robust succession plan ensures business continuity by addressing various scenarios and outlining contingency plans. It should include details about who will take over day-to-day operations temporarily if the principal advisor cannot fulfill their role. By addressing these elements in advance, you are protecting the business, its employees, and its clients from undue risks.

Transitioning to the Next Generation or Family Members

Succession Plans Involving Next Generation or Family Members

Transitioning the business to next-generation or family members can be rewarding but requires careful planning. Ensuring that successors have the required skill sets and share the company’s vision is essential. It is also critical to address family dynamics and set boundaries to prevent personal relationships from affecting the business. A phased transition period often helps in acclimatizing the new leaders.

How to Facilitate a Smooth Transition to Family Members in Advisory Business

A smooth transition to family members involves open communication, role definition, and a timeline for the changeover. Clarity around responsibilities and a formal training program can help. Financial advisors should also consider the implications of ownership shares, governance structures, and decision-making processes.

Expert consultation can be invaluable for navigating family professional complexities.

Speak with a 360 Financial Succession Expert

Have a succession plan that works for you and your clients. Why settle for a private equity sale that doesn’t support your vision or protect your clients? We can help you leverage your assets and monetize your business with a single transition that delivers a win for your clients, employees, and your family. Schedule a 15-minute Succession Call

Fair Market Value and Outright Sale

Understanding Fair Market Value in Succession Planning

Understanding the fair market value of your practice is crucial for an outright sale. This not only helps in setting realistic expectations but also in negotiating better terms. The valuation can be determined by several factors, including the firm’s assets, client base, revenue streams, and market conditions. Utilizing the services of a professional valuation expert can provide a more accurate estimate.

Considerations for an Outright Sale of the Advisory Firm

An outright sale may seem like a straightforward exit strategy, but it comes with its own set of considerations. These include finding the right buyer who aligns with your business culture and objectives, conducting due diligence, and negotiating sale terms. There may also be regulatory compliance and client transition aspects that need to be managed carefully.

Client Relations and Retention During Transition Period

Communicating the Succession Plan to Clients

Transparency and effective communication are crucial when informing clients about a succession plan. This reassures them and reduces the likelihood of attrition. Regular updates, personal meetings, and a clear transition timeline can go a long way in retaining client trust. Additionally, introducing the successor in advance can help smooth the transition process.

Strategies to Retain Client Base and Attract New Clients During the Transition

Retaining your client base during a transition involves maintaining high service standards and focusing on communication. Strategies may include offering special consultations to discuss changes, providing assurance of continuity in investment strategies, and even leveraging the transition as a marketing opportunity. Encouraging the successor to build relationships with existing clients can also help in attracting new clients.

At 360 Financial, we recently acquired Flemming Investment Group. Below is a case study that goes over this successful merger.

Case Study: Navigating a Successful Merger for Long-Term Stability


Background: When Fleming Investment Group, an independent advisor, contemplated merging their sole advisor firm with a larger team, they sought a diverse skill set and essential resources for a successful merger.

Challenges: Their boutique firm lacked dedicated investment, marketing, and client communications departments crucial in our industry. They needed a team that could provide these resources and facilitate a seamless merger.

Valuable Lessons Learned: The merger process highlighted the need for a conversion checklist and on-site technology expertise to avoid potential pitfalls.

Client-Centric Approach: Client communication remained collaborative, focusing on their well-being, along with staff and families.

Long-Term Stability and Succession: The focus was on ensuring moves benefited clients and assured long-term career stability for the team. This included certification, structured investments, and a strong succession plan.

Conclusion: Fleming Investment Group’s case demonstrates the importance of a diverse team, client-centric approach, and long-term planning in achieving a successful merger and ensuring stability for the future.

Elite Support Partners: Superior Transition Service

Dreading the work involved in changing broker dealers? What if a superior transition team came in and did all the heavy lifting for you? Our team is specialized, organized and fast. We expedite timing, open all the accounts and handle all repapering.


The Sprint: 30-45 Day Expectations:

LPL Transitions Team opens all accounts and 360 Financial Transition Staff oversees signatures on all electronic and mailed documents

The Results:

  1. 86% accounts opened with 90% account transfers complete within three weeks*

  2. Compliments to the team with a <2% NIGO rate

*Statistics based on Flemming Investment Group transfer to 360 Financial in 2022.

Expert Guidance and Support in Succession Planning

Seeking Expert Guidance for a Solid Succession Plan

Succession planning is complex and involves various facets, making expert guidance invaluable. Legal advisors, valuation experts, and even succession planning consultants can provide specialized insight that you might overlook. A multidisciplinary approach ensures that all bases are covered, from legal compliance to fair valuation and effective client transition.

Resources and Support Available to Financial Professionals in Succession Planning

Various resources are available to assist financial advisors in succession planning. These include industry publications, online courses, and consultancy services specialized in succession planning. Professional associations often offer guidelines, templates, and tools to help with drafting a comprehensive succession plan. Peer networks can also provide valuable insights and best practices.

Your Financial Advisor Business Succession Plan

Planning for Your Own Retirement as a Financial Advisor

Integrating Personal Financial Planning into Succession Planning

It’s crucial not to overlook your own retirement planning while focusing on business succession. This involves integrating personal financial goals into the succession planning process. From assessing retirement needs to aligning investment strategies, you must ensure that the sale or transition of the business adequately supports your retirement and lifestyle goals.

Closing the Chapter: Moving into Retirement as a Financial Advisor

Retirement marks a significant life transition and closing your professional chapter should be planned with as much care as you’ve provided your clients. Ensuring a smooth transition not only preserves your professional legacy but also offers you peace of mind as you move to the next phase of life. Taking the time to reflect, celebrate achievements, and set new life goals is essential for a fulfilling retirement.

Your Succession Plan

The Importance of a Comprehensive Financial Advisor Succession Plan

A comprehensive succession plan is not just a safety net for financial advisors; it’s an essential business strategy. It provides a roadmap for your exit, ensuring that your clients continue to receive excellent service and that your legacy endures.

A well-crafted plan can also increase the value of your firm and provide financial security for your retirement.

How Proper Succession Planning Benefits Clients, Advisors, and the Financial Planning Industry

Proper succession planning is a win-win for all parties involved: clients, advisors, and the broader financial planning industry. Clients are assured continuity in service, advisors can retire with the peace of mind knowing their life’s work is in capable hands, and the industry benefits from a smoother transition of expertise and clientele.

Succession planning, therefore, is more than a business necessity; it’s a service to your community and industry.

Speak with a 360 Financial Succession Expert

Have a succession plan that works for you and your clients. Why settle for a private equity sale that doesn’t support your vision or protect your clients? We can help you leverage your assets and monetize your business with a single transition that delivers a win for your clients, employees, and your family.

About the Author

Brian Bohnsack, AIF®

Brian attained a bachelor’s degree in accounting, earned his FINRA series 7 and 66 securities registrations through LPL Financial, and carries life and health insurance licenses. Brian has a wide range of experience in financial services, accounting, and management. He loves working directly with his clients to help them learn more about their goals and dreams and educate them about financial planning and investing.

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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


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