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Mitch Anthony's Intuitive Advisor

The Practice Doctor is IN

Eric and Jo

by Al Depman, CLU, ChFC, CMFC, BH
Practice Management Consultant

Al Depman photoFor the past three years, I've been working with Eric, an advisor who has been in the business for 25 years. His daughter, Jo, has recently started licensing and would like to be a possible successor to Eric. Both of them would really like to make this transition work. They have a five-year period identified as the timeframe.

I've identified ten non-financial characteristics to look for in the ideal successor. Let's look at them in light of Eric and Jo:

1. The potential successor needs to have professional life experience. The 10,000 hours rule applies: has she spent at least that much time in pursuing her mastery of a business career? This concept is reinforced in Malcolm Gladwell's bestseller Outliers. Those 10,000 hours allow the successor to competently perform the routine tasks of dealing with people on a professional level. Jo can focus greater mental energy on the practice as a whole, embracing all eight of the business systems that make up a successful—and transferrable—practice (see number 2 for a list of those systems). A candidate with fewer than the 10,000 hours will probably be distracted by deficits in one or more areas: time management, client management and/or client acquisition, especially.

Jo's background included a degree in marketing, two years of high-end retail sales work, and two years working as a bank loan officer. Her work ethic has been admirable—she put in 60-hour weeks for her retail job and 55-hours on average during the bank tenure, all with excellent references. Consequently, over the past four years she has amassed well over 10,000 hours in the business world. Combined with her college hours dedicated to marketing, it all adds up to someone ready to jump into Eric's practice.

2. Will the successor learn the business systems put in place by the senior advisor, and does she believe in those systems? There are eight business systems: (1) Client Acquisition, (2) Client Management, (3) Sales, (4) Case Development, (5) Time Management, (6) Communication, (7) Education, and (8) Financial Management. The practice has been successfully running on these systems for years. Will Jo want to revamp them significantly?

Since she is coming in from outside the financial services business, Jo will not be initially in a position to question Eric's systems. However, Eric must demonstrate that the systems he's implemented are solid and worth picking up and running with. He understands that his daughter will not automatically accept the status quo and will eventually question all of the systems. She will want to make them her own and in that process, will reinvent some and stick with others. Dad had best be able to defend his systems!

3. Value statements and/or mission statements should be compatible in theory and execution. A reasonable amount of joint work between Eric and Jo is a must in order to ensure the successor's consistency in word and deed. Joint work means both appointments face-to-face with clients and back-office collaborations on case preparation.

4. There should be a minimum of a two year ramp-up where the successor has a defined number of reviews or meetings with the senior advisor's A-list. These meetings should cover financial and life philosophy, what the planned "next steps" are with the client, how to handle any legacy issues of the client's and his next generation, and a simple "gut check" of compatibility after the meeting. Both Jo and the top client should report separately to Eric after the meeting.

5. Are the advisor's B and C-level clients fertile enough to help support the successor? The top 20 percent of the clients will produce 80 percent of the revenue and, as in point four, there should be compatibility between Jo and those top clients. Members of the other 80 percent of the clientele should have also been flagged for potential new business, additional assets to attract, and/or name-generating ability. Does Eric have the knowledge, systems, and staffing for Jo to eventually glean the best of these opportunities?

6. Will there be a transition team, or will the successor need to supply her own? A transition staff team would provide a consistent voice and personality until Jo has become entrenched. Eric's key assistant will probably retire when he does and has expressed interest in helping bring on her replacement.

7. Will the senior advisor remain available for consultations? If not, Jo should be prepared to answer any questions from the clients concerning Eric's reasons for recommending particular products or pursuing specific strategies.

8. The successor should seek a detached, third party assessment of the senior advisor's practice to see strengths and weaknesses (visit for a look at this assessment). The results provide the basis for an excellent dialogue about compatibility, styles, vision, systems, and flexibility.

9. There should be a client survey done before the transition to set a standard of satisfaction that will be a benchmark for the successor. Assess overall value provided by the practice in the areas of: service experience, contact preferences, depth of client information, opportunities for additional business, and "refer-ability." In scaling responses, it's important to go with a scale of either 4 or 6 responses. This is to avoid the default "middle" response that an odd number would provide, which would tell you little of value: 1 = excellent, 2 = good, 3 = acceptable, 4 = unacceptable

10. Is the person capable of navigating the politics of the firm, home office, and other organizations important to the practice's success? Eric has built many relationships over the years that should be maintained. On the flip side, if he has burned bridges, Jo should be aware of that so she can try to rebuild them.

Using these 10 questions over the years, I've derailed a few potential alliances and verified others. Often, there is an irrational optimism that the successor will "just fit right in." This needs to be tempered. On the other hand, there are curmudgeonly advisors who are pessimistic about giving their clientele over to anyone and as a result, need lots of reassurance. Using this disciplined approach brings out the best in all parties. With all these pieces in place, the discussion about sale price and financing will go more smoothly since the scope and potential of the practice has been fully vetted.

At this time, Eric and Jo are doing well. She is completing her licensure and is beginning to work in the office to get familiar with the staff and processes.

Comments and opinions welcome!

The Doctor is OUT

© 2014 Al Depman

Al Depman, CLU, ChFC, CMFC, BH, a.k.a. "The Practice Doctor", is's Business Practice Consultant, and contributor to "The Wall Street Journal." He is the creator of "The Practice Management Assessment" tool and materials and has authored numerous articles in professional publications on practice management, and author of the book, How to Build Your Financial Advisory Business and Sell It at a Profit, available from McGraw Hill. Al combined his Liberal Arts studies with 10 years of management experience with McDonald's Corporation to enter the financial services world 25 years ago. Since then, Al has evolved from an MDRT-level sales rep into a full-time consultant specializing in helping others engineer their business practices to the next level. Contact him at

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