You may feel like you've got plenty of time to think about your succession plan and transition to retirement but in fact you should be thinking about it up to 10 years in advance.
Vanessa Stoykov, founder of No More Practice, said that retirement had been on the minds of many advisers in their 50’s and 60’s, but FoFA had been the final straw in making the decision. Subscriptions to the No More Practice, which provides advisers with succession and growth education, were growing by 16% each month – showing an increase in demand for succession information.
She said the succession process usually takes about five years, so it’s not a matter of waking up and deciding to hand over the business. There are numbers and processes to put in place in order for an adviser to make their practice look appealing to a buyer. Then there is the human aspect of handing over staff, and that can be a big issue for people who have run the business for a long time and have loyal employees.
Simon Harris, executive manager for Guardian Advice, says he encourages his advisers to think about their succession plan up to ten years in advance. Three things he says advisers need to consider are:
You need a plan; the earlier you can start those plans the better. “We’re encouraging our guys to think forward, not just three years – think forward five and 10 years – and start with the end in sight.”
Make sure you get the cultural fit right. This goes for principals bringing young advisers into their practice, as well as young advisers choosing a business to partner with.
Partner with a licensee that has the skills and resources to support the transference of wealth. “We’re finding that licensees can either be an enabler or they can be a hindrance; and it’s pretty clear to most advisers which one they’d like their licensee to be.”
As well as the transference of wealth, advisers also need to think about sharing knowledge. “A lot of these baby boomers, not only do they have big businesses, they’ve got incredible skill sets; knowledge built up over many years of financial planning experience and we try and transfer a lot of that knowledge and IP to the younger adviser.”
Stoykov said 29% of No More Practice’s database was in succession mode and calling out for more education on how to make the transition smoother for their business.