How Is An Advisor Succession Plan Helpful In Finance?

How Is An Advisor Succession Plan Helpful In Finance?

There are many financial advisors that do not have a legit advisor succession plan formulated for their company, even though it is always recommended by them that their business clients should set upon. It is common knowledge that financial advisors often lack documented, concrete plans.

What Is Succession Planning?

Succession planning meaning is a strategy that is used for the passing of leadership roles like the ownership of a company to a particular employee or a group of employees. This is also known as “replacement planning” and it makes sure that the business continues to run smoothly even after the most important people of the company move up to new opportunities, pass away, or retire. This strategy can also give an event of liquidity that will enable ownership transfer in an ongoing concern of increasing employment. 

How To Create A Succession Plan?

A good succession plan needs an advisor to find someone in their workforce who is willing and capable to take over the practice. According to Alex Chalekian, the CEO of Lake Avenue Financial in Pasadena, California,

"Start having the discussion because you may find that a lot of advisors in your company may not enjoy managing a business or taking it over or, more importantly, may not have the financial capabilities to buy one."

Another way is to examine your present network of advisors and then decide who you would feel to give your practice. According to Chalekian,

"It's important to identify someone – think of it like having a life insurance policy."

Make sure that your company has detailed data of all your clients. Having a financial advisor succession plan template is important as this is a client based business so it is necessary to be prepared from beforehand with all data and information ready to be passed forward. 

Here is a shortlist for advisor succession plans to follow:

  • Formulate a workflow and process that you can repeat. It enables the successor to get up and run to support the client. 
  • Make sure the CRM that you have is enough and that has all your investment strategies and notes. This step allows other advisors to take over the connection with your client. 
  • Enable a transition period. It can take a minimum of a year for any successor to learn the work and get used to it. So keep that time in hand where you can assist the successor.   

According to Chalekian,

"It's not fair to not have one – they trust their financial wellness with you. They need to know if something happens to you, that there is a plan and a process in place, and they will be taken care of."

Effect Of Skipping The Advisor Succession Plan

There are many financial advisors who are putting off their succession plan for an undefined time in the future. According to a report, nearly 90% of financial advisors lack a formal succession plan. Even though advisors are well knowledgeable about the consequences for a client to not plan for retirement, they do not always see the problems they can be if they fail to formulate a plan for their exit from their own firm. Here are the impacts that can happen if there is no advisor succession plan.

The Firm’s Value Plunges

Succession planning for financial advisors is best initiated by obtaining a valuation of the firm that will allow you to optimize your performance for the best results. So without a proper plan, the firm’s valuation immediately reaches fire sale pricing.

The Firm’s Income Stream Ceases

If there are no official plans, then the family members are not licensed professionally as financial advisors, so they will have to disconnect the collection trail commissions, advisory revenue, and other vested commissions. They will then want to liquidate the firm and hence in that hurry they will not get the correct valuations as well.

End Of Financial Relationships

Without the practice of adequate processes, the regular bills of the firm may be left unpaid, client billing may also not be handled optimally which will reduce the liquidity of the firm. If the practice includes outstanding debt obligations, the banking relationships and the vendors may become concerned and may not want to work further with the firm.

Client Walk Away

If the form fails to communicate with the clients on a regular basis and effectively then there are competitors waiting in the market. The client can maximum give you the time of 60 days but despite that, if there is no improvement in your work or relationship with the client then they will leave.


Having an advisor succession plan is important as that can only save your firm if you retire or pass away. A good succession plan will save your firm from downing. To try to formulate a succession plan for your firm as soon as you can.

Frequently Asked Questions On Advisor Succession Plan

What is a succession advisor?

Succession Advisors serves as an informational resource for people who are hoping to learn about family governance, estate planning, and luxury lifestyle connections. These dual services are provided in tandem as consulting and information go hand in hand, working together in support of your future goals.

How do you write a simple succession plan?

To write an efficient succession plan first determine the type of plan then put a succession-planning team together. Then Identify the main factors that will influence your plan. Next link your succession plan to your firm’s overall strategic plan, then identify sources for successor candidates, and finally shape action plans.
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Yang Liú

Yang Liú is a writer who revolves around business, investing, technology and electronics. Her articles are constant proof of her expertise in these niches.

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