Don’t Wait, Formalize your Succession Plan Now

Succession planning should be a vital component of any financial advisory business plan, although too many advisors put it off or simply avoid it entirely. According to Charles Schwab & Co.’s 2014 RIA Benchmarking Study, only 49 percent of advisors have formalized succession plans in place. This is ironic given one of the top concerns among clients is, “What happens if my advisor passes away, or is no longer there?” Many advisors put off succession planning because they developed their practices into lifestyle-conducive businesses and do not plan to retire; however, without a succession plan, advisors are placing themselves, their families and their clients at serious financial risk.

Independence is Key

An important step in creating a succession plan is to identify the true value of the business—which advisors can only realize if they own their own firms. Advisors who are employees of wirehouses have no ownership of their client relationships, no matter how much blood, sweat and tears they pour into them over the years. Independent RIAs own their relationships and their practices, which gives much more control over the directions and futures of their practices than their wirehouse counterparts.

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