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Moving from Success to Succession

Insights based on The Flexible Advisor podcast

Why planning is imperative, and how to begin 

It is no secret that the advisor population is aging. Still, many advisors aged 50 or older have yet to move beyond a vague idea of what a succession plan might look like, let alone formalizing one. While the concept of succession should be considered in every stage of your business, becomes critical in the later stages.

Crafting a plan, of course, entails a variety of considerations. The Flexible Advisor recently spoke about them with Linda Willis, founder, CEO, and President of Career Management Advisors | CMA Consulting. 

The First Hurdle

What prevents firm leaders from actively planning the future of their company?  “With respect to RIA founders and owners in particular, I think it’s the idea that they will lose control upon a transition — whether they choose to stay in the business as part of their succession strategy, or if they stay merely through the turnover,” said Willis. “I think there is a sense of losing a significant part of their identity. A number of people I've worked with in the succession planning process really love what they do; they have no desire to play golf or stay at home or do something different.” The irony, she says, is that “RIAs are fiduciaries, and there is something inherently conflicted about an advisor whose strategy is basically to die in the chair. Lack of succession planning doesn't necessarily serve the fiduciary responsibility well.”

The Price of Procrastination

Willis describes the case of an advisor that had no plan, and the effect that ultimately had on a lot of people. “An advisor died unexpectedly during the COVID pandemic. Her husband called us five months after, at which point it was too late in the game. She did not have a buy/sell agreement or an emergency exit plan, much less a longer succession plan in place. By the time he called to engage our services, most of the clients had left, all of the advisors had left and there were no assets, no value, left in the business. His wife had been the primary breadwinner in the family. She had built the firm from scratch. They went from netting $450,000 or more per year from the business to it being worth nothing.”


  • Lack of succession planning doesn't serve your fiduciary responsibility. 

  • You want your family, your beneficiaries, to be protected.
  • It's going to take about 2 years to consummate any deal.

This, said Willis, illustrates the importance of an advisor having at least an emergency exit strategy, no matter the stage of the practice. “In the event that you die unexpectedly or become disabled you want your family, your beneficiaries, to be protected. You don’t want everything you've built to go out the window.” The call to action for advisors, she says, is to act on this important cornerstone of your business sooner rather than later.

“Succession planning is about creating a life plan for your practice.”  - Linda Willis

Put Your House in Order

To begin, Willis suggests focusing on key elements that make the business attractive, not only to clients, but ultimately for the next iteration -- a succession plan and, ultimately, an exit and monetization on behalf of the equity holders.  That starts with identifying key elements of your business.

  • What's your value proposition as a firm? 
  • Who is your optimal client?
  • What are you doing to attract them?
  • Do you have organic growth in the firm, and are you focused on that?
  • Are you treating the business like a business?
  • Are you redeploying capital into the firm for purposes of enhancing growth technology platforms?
  • How are you approaching the acquisition of talent?
  • Are you ensuring diversity with respect to your revenue streams?
  • Is the client base overly reliant on one person so that there can't be continuity when the founder departs?

“The most important thing,” said Willis, “is pre-planning. Before you even start the process, create your vision of what a good succession plan looks like for you. What are your criteria for a positive succession? What's most important to you? What's a non-starter? If your focus is the highest dollar amount, note that as a top priority. That will inform your choices in the marketplace versus passing your legacy to internal junior partners or members of the firm.”

The Timing Question

How far in advance of a planned exit or transition to new leadership should the process begin? According to Willis, two years is a reasonable timeline. “It's going to take about 2 years to consummate any deal. The search for the right partner can take longer, depending upon the level of due diligence, unless two people have already found each other and determined that they, their businesses are compatible, the client bases work, and this is what they want to do, you know, that papering process and transition, can obviously be abbreviated, but unless all of those things are aligned, It's going to take a lot longer than that to get things accomplished. Optimally, most firms would like 2 years at a minimum just to make sure that the retention opportunity is maximized.”

Just Begin

“So many RIAs are also acting as financial planners,” said Willis. “Succession planning is really about creating a life plan for your practice; advisors should simply apply the same type of steps to their practice. Apply the steps; sit down with a blank sheet of paper and put down what's important and what isn't. Unfortunately, I often see a case of the cobbler whose kids have no shoes.”

You can access the full discussion on The Flexible Advisor, wherever you get your podcasts.

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