Advisors make their clients understand the importance of careful planning for their future goals. Ironically, most advisors have not addressed a critically important question to them: what will happen to their business when they retire or die?
A whitepaper by ADP Retirement Services lists out the importance of a succession plan for advisors. “It is clear that succession planning is important in many ways – for the sake of continuity of care for clients of course and for providing funds for the advisor’s retirement,” says the whitepaper.
Clearly, assets under advisory (AUA) is the biggest asset an advisor has. When an advisor retires, he should be able to earn from the assets he has built. According to the whitepaper, with proper succession planning, an advisor can ensure that he reaps the benefits of his hard work. “Working on a succession plan well ahead of the desired retirement date allows for more planning options and can add significantly to the advisor’s total compensation,” the whitepaper says.
Another approach to the topic of succession planning is to think in terms of business continuity. What would happen to your clients, employees and family in an unfortunate event of some sort?
Business interruptions can take many forms and a succession plan helps advisors ensure that advisors can help their clients even after they retire. “Advisors must have an up-to-date plan describing the steps that a firm will take to protect their accounts in case normal service is interrupted. Investors are exposed if their advisors don’t have contingency plans in place,” says the whitepaper.
It is clear that succession planning is the ultimate worth of an advisory practice.