Three Critical Mistakes Advisors Make With Succession Planning

Posted by adaniels in Blog on January 25, 2012

Most people do not want to think about the fact that they will eventually die, and some of them are afraid to even make plans for what should happen to their assets after they pass away. That also goes for financial advisors. RegisteredRep reveals the results of a new report by Pershing Advisor Solutions, “Developing a Sustainable Business and Succession Plan.” According to the report, 70 percent of financial advisors with revenue of $5 million or more either do not have a succession plan at all at their firms, or have an inadequate one.

Given that financial advisors work with such plans for their own clients, this news is surprising. “When you know you have to go to the doctor, you keep putting it off,” Kim Dellarocca of Pershing. “It’s the characteristics that make us human. It’s an element of, ‘Nothing’s going to happen to me, nothing’s going to happen to my business, everything’s going to be fine.’ We all prefer to go through life thinking that way.”

The report says that there are three big mistakes that those advisors who do have succession plans make:

• Picking the wrong successor: Advisors should choose someone whose skills are aligned for the future, not just the present. Dellarocca says companies ought to ask, “Who here aligns with what the future of this firm is going to look like?”

• Making choosing a successor an office competition: “Telling potential successors in a practice that they all have a shot at taking over is asking for trouble,” RegisteredRep says.

• Coming up with plans during a state of panic: No need for fear here. Instead, Dellarocca says, advisors should think about the three groups of people counting on them – their employees, their investors, and their own loved ones, in order to decide what to do. “When you think about these groups that are counting on you, that really starts the process from a place of heart,” Dellarocca says.

Written by Lisa Swan


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