Industry Trends and Your Financial Planning Practice, continued
At the March Colorado Financial Planners Association (COFPA) meeting, Sameer Somal, Blue Ocean co-founder and CFO also put the floodlights onto important questions every financial advisor needs to consider: what’s next for your life?
Somal reminded us that oftentimes, the most difficult barrier to overcome when planning for the future comes from within the financial advisor himself. Most of us find change difficult. Changing our roles within our financial practice may involve a number of challenges such as
- Loss of identity
- Change in lifestyle
- Loss of making a difference daily
- False sense of immortality
- Desire to remain in control
- Lack of trust in a potential successor (which may drive him/her away)
- Fear of retirement boredom (from our client horror stories)
- Lack of options
- Time
Some advisors I’ve talked with have expressed a desire to see their practice pass on to a son or daughter. They may unconsciously assume their adult child knows what they want or intend. I have also know some advisors have been driven to a Plan B. Many may think they will beat the odds that are true about family businesses in general:
• 88% of current family business owners believe their descendants will control their business in five years.
• Only about 30% of family businesses survive into the second generation.
• 12% are still viable into the third generation.
• 3% of all family businesses operate into the fourth generation and beyond.
Transitioning the goodwill of trust that financial advisors have built up with clients over the decades is very difficult to accomplish. What’s the one thing a financial advisor can do?
We can paint the picture of our ideal succession plan and work toward it. It’s crucial to invest time wrestling with questions we’ve been too busy to address.
- How long do I want to serve my clients? (Be specific!). Do I want to do that full-time or part-time?
- What are the principles and core beliefs (vs. platitudes) of my firm? Will alignment around those be sufficient to for me to entrust my clients to the care of that other advisor?
- What are my spouse/significant other’s dreams for the future? What does this imply about my relationship with my firm?
- What activities will I pursue when partially or fully retired? (I’ve found Chuck Blakeman’s Making Money is Killing Your Business to provide invaluable tools for firm owners to clarify Lifetime Goals).
- How would I prioritize my values of legacy impact vs. time off vs. family relationships vs. assets needed?
Then, there are the very real fears that may keep us from ever starting:
- Is my fear of having to tell my clients about my succession plan keeping me from developing one?
- Do I avoid addressing my clients’ concerns about their future with me?
A survey of 228 practice owners showed their most difficult challenges as follows:
- 22% said it was finding the right practice to acquire.
- 22% said it was client retention.
We can take the first step toward preparing for these challenges by taking time to gain clarity about what’s getting in our way and what we want our future to look like. A succinct, ideal succession plan will help guide us to the right successor and retain our best clients for him.
Toolkit:
What are some initial steps you might take to floodlight your inner world as a planner?
- Get started on your future today! Take a step toward creating a written plan by setting time in your schedule this week to get started. Set measureable waypoints to ensure steady progress toward completion.
- Answer this: What are the principles and core beliefs (vs. platitudes) of my firm? Will alignment around those be sufficient to for me to entrust my clients to the care of that other advisor?
- Answer this: What do I want to do in retirement? How will this help shape the kind of plan for my firm tomorrow?
