3 common mistakes of succession planning

At some point, you’re going to retire. Whether that’s partially or completely, you’ll need to execute a successful transition for your business, and that doesn’t happen overnight. It’s more like thinking ahead five to 10 years. “Advisors need to do the same thing they’re preaching to their clients,” Ralph Steiner said.

He should know. Steiner has spent about seven years helping financial advisors transition their businesses in his work at Minneapolis, Minnesota-based Transition Brokers Inc. Before then, he had his own independent financial planning practice for about 45 years. Around the 40th year, when clients started to ask him what would happen if he was unable to serve them anymore, he had no answer. Steiner’s successful transition happened after five years and many dead ends, making the following mistakes he now sees frequently in his consulting work:

1. Considering newer people in the business rather than those with experience running a practice that’s at least the same size. “You need people who have attained about the same level of success you have. They will be able to support it.”
2. Narrowing eligible buyers to a set geographic area. Steiner began looking for someone within a 25-mile radius but ultimately sold to buyers more than 100 miles away.
3. Assuming buyers would have the necessary cash to buy the practice. Because few have that amount available, Steiner participated in the financing by having a payout over a period of three years and worked to transfer clients one by one. The result: a 98 percent retention of his clients.

Read more in the Round the Table article “Know your practice’s worth”

Written by Matt Pais, MDRT Content Specialist