As financial advisors one of the most important roles we play is identifying risk for our clients and offering them solutions accordingly. This can be in the form of shortfalls in retirement, life cover for dependants, medical cover or even business cover. Ironically most brokers fail to do so within their own practices, leaving them (and their clients) at risk without a succession plan.

Only 54% of financial planners in our industry have a succession plan in place.

One in every two planners are failing to plan and to make matters worse this figure does not highlight the feasibility of the set plan. As you read this article, ask yourself which one of the two are you. What example are we setting for our clients if we don’t follow our own advice and arrange a “buy and sell” agreement for our practice?

The importance of a Succession Plan

A succession plan is like a battle plan, if it’s weak, you may lead your troops (beneficiaries / successor) down a fatal path; or even worse, without a plan, your troops may be left completely exposed where they will be caught off guard.

As financial advisors we need to invest the necessary time and effort, to develop a plan as leaving this to our loved ones (when we pass onto the pearly gates with Saint Peter) will put additional strain on them and without the necessary technical understanding, they might still fall short.

In a worst case scenario, you may become mentally or physically disabled, which raises the need for a succession plan that can easily be executed even higher. It will be the difference between being able to provide for your family and being a burden that adds to the living cost and medical expenses.

We tell our clients to plan for events, where disability can be more expensive than death, so do the same for your practice.

How to develop a Succession Plan

Research all aspects, plan for the worst and hope for the best. It’s a common saying in the military. There are 3 contingencies to plan for being; retirement, death and disability.

Succession planning for Retirement

As we grow older our energy / desire to operate and service clients at the same pace as we once did may change and as we encourage our clients, you might want to take the time to smell the roses and live a little as you enter retirement.
However, retiring does not necessarily mean we completely stop practising or more importantly drawing an income as a financial planner.

Being able to draw an annuity income is the very reason many financial planners join the industry.

By implementing a Succession Plan for Retirement you can negotiate a deal with your successor where you still draw a portion of your annuity rather than selling your business for capital, which you would need to invest anyway to provide annuity income.

Succession planning for Death and Disability

It is important to remember that the business you built is based on the relationship that you have with your clients and when you die or become disabled the relationship relies solely on the business, which could leave your client base vulnerable.
The longer your client base is exposed or unattended the faster it will erode.

If your loved one must first find a suitable successor, it will take time, increasing the erosion. When you have a succession plan in place, your successor can quickly take over the reins, protecting the base and if so arranged the annuity income that your beneficiaries may receive. It also allows income to flow to beneficiaries while your estate is being dealt with.
Something else to consider is, how much faith will your clients have in the new successor if you weren’t the one that nominated him/her.

The bottom line is that as advisors, we need to be our own clients and have a proper financial plan in place. Death, disability and retirement planning, isn’t just for clients……it’s for advisors too. If you need some assistance in getting a plan in place, speak to us at Stringfellow.

If succession planning is something you’re considering fill in the details below and we’ll contact you, for an obligation free consultation, to see how we can create a succession plan that meets your requirements.

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