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The Practice Doctor is IN

Challenges and Mistakes in Succession

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

Al Depman photoMany of the advisors in our audience are approaching a decision point as the calendar mercilessly flips its pages and you turn (at least) 60. Depending on your circumstances, you may have the opportunity to sell your practice. Many advisors I've been working with are having trouble finding the right successor. Why is that? Let's look at three groups of three that I've discerned from the trials and tribulations of these valiant successor searches.

1) Why is it sometimes challenging for a junior advisor to be a senior advisor's successor?

The three P's:

  • Philosophy. One possible challenge is that the senior advisor is a full-service financial planner and the successor is more of an investment-oriented person, with less emphasis on insurance. One might like lots of client education and the other encourages clients to do their own research. One might be very scrupulous about the fiduciary responsibility, and the other more compensation-driven. Philosophy bottom line: understand that the successor is not a clone of the retiring advisor.
  • Personality. One of the advisors is easy-going while the other advisor has a type-A personality. One is more comfortable with phone chatting; the other prefers quick texts or email communication. One works casually dressed; the other in a suit and tie.
  • Processes. One advisor might be geared to a paperless practice, the other more paper-based. One loves a sophisticated CRM, while the other prefers an unadorned database or even paper. One relies on the firm's processing team; the other prefers to keep it close to the vest within his/her team.

2) What mistakes do the retiring advisors make when dealing with a successor?

The three M's:

  • Meddling. Once the transfer is done, the retiring advisor should step away and allow the successor time to build those key relationships. Some transition help is appreciated but there should be a definitive point of professionally letting go.
  • Melodrama. Avoid reminding one and all how tough it was building this practice with the blood, sweat, and tears invested, and that the successor is getting the benefit of all that hard work. Share the challenges you may have faced, but avoid the drama.
  • Money. Once the deal is made, step away and play by the established rules of the contract. Don't second-guess or nitpick.

3) What mistakes do the successors make?

The three H's:

  • History. Hopefully there have been notes and discussions about the unique history of each client and his or her singular situations, confidences, and circumstances. The successor needs to be privy to this information and use it judiciously. It's a mistake not to share this information.
  • Help. Don't make the mistake of not asking for help. Staff people, home office people, management, and the retiring advisor are all sources to be tapped. Don't bull-headedly make decisions that turn off people who will be vital in helping the transition work.
  • Honor. Don't forget the legacy of the retiring advisor. Grace and dignity are the successor's greatest assets. This is what the successor is purchasing as much as the income streams.

Advice for successors trying to step into this role?

Have a prenuptial agreement and a honeymoon period (usually a year) before the final contract is effective.

Hopefully this will help as some of you step into this process of succession planning.

The Doctor is OUT


© 2017 Al Depman

Al Depman, CLU, ChFC, CMFC, BH, a.k.a. "The Practice Doctor", is MitchAnthony.com's Business Practice Consultant, and contributor to "The Wall Street Journal." He is the creator of "The Practice Management Assessment" tool, the key component of The Business Practice Check-Up™, has authored numerous articles in professional publications on practice management, and is the 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 al@mitchanthony.com.


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