By Berkeley Davis RETS ASSOCIATES
We are at the mid-point of the year which is an ideal time to evaluate the state of your business and where you are in relation to your business plan. Are goals being met? Challenges overcome? And are your top client relationships strong enough to sustain a wealth management firm through economic uncertainty (or an executive exit)? To ensure those questions get answered, it is wise to take a further step back and consider an oft ignored challenge to long-term success; succession planning (SP).
Succession planning… the words are simple but sitting down and developing a plan can be intimidating—even to wealth management firms. Perhaps the words evoke some feelings of uncertainty, or fear, or quite simply they represent a task of the future that can be addressed another time. Yet SP should be at the top of your mid-year checklist, every year. All companies need to approach SP as an ongoing activity and process with no start or end date, because it is not a onetime occurrence. SP is about helping your firm ensure and confirm that it has the talent pipeline to fill key positions. And it is about providing assurances to investors, capital partners, shareholders, and employees that the firm is more than just one or two individuals. By prioritizing succession planning, wealth management and RIA firms demonstrate their commitment to sustainability, adaptability, and long-term viability, thereby attracting top talent and reinforcing their organizational strength.
While the popularity of the ‘Succession’ television show has many thinking about succession planning for the first time, be careful to not make the mistake of thinking that it does not apply because we’re in the wealth management industry. At many wealth management and RIA firms, Baby Boomers naturally hold leadership positions due to their age and experience—some of whom previously pushed back retirement plans to remain with their firms during the challenges of the pandemic. This summer, we will reach ‘Peak 65’, defined as the maximum number of professionals reaching the traditional retirement age of 65. With that in mind, this year will likely result in the highest number of professionals leaving the industry. Will that impact your success? Your client base? Your pipeline? Be more than aware. Be prepared.
Is succession planning an integral part of your firm’s growth strategy? If not, consider the following…
Why Succession Plans Are Vital:
- Everyone has an End Date – planned or unplanned
- Unexpected Illness/Medical Situation – preventing an employee from performing their duties
- Unexpected Resignation
- Declining or Poor Performance
- Termination – for cause or not for cause
Benefits of Succession Planning:
- Long Term Viability of your firm
- Confidence from capital partners, investors and shareholders
- Stability/Security which aids in attracting/retaining talent
- Seamless Business Continuity
- Risk Reduction when the unexpected happens
While many view succession planning as a C-suite initiative, it is critical that company leadership examine it across the entirety of the organization. SP can and should be applied to a first-year advisor, a seasoned wealth manager, and yes, all the way up to the C-suite.
For most wealth management firms, succession planning is not an option, but an absolute necessity. Thousands of professionals will exit the industry in the second half of 2024 and beyond, and millions of staffers will be impacted. The failure to plan for the inevitable at all levels is both inexcusable and avoidable. Succession planning serves as the principle means to guarantee the sustained operations, consistency, and ongoing survival of your business. A proper succession strategy will lead to significantly increased chances of creating a positive outcome both now and in the future. Don’t just be aware. Prepare.
Berkeley Davis is Principal of RETS Associates
