The average age of a Financial Adviser / Planner in the UK is now 56 (FT Adviser March 2024). This means that many are now facing the same challenge they’ve helped their clients with for years: gaining financial independence and retiring while they’re still young enough to enjoy it.
The three options
When it comes to succession, advisers typically consider:
- Winding the business up
- Selling the client bank (or business)
- Appointing a successor
For those who care about their clients’ futures and seeking their own financial independence in retirement, option 1 is rarely viable.
Selling to a larger firm might seem attractive, but that can comes with its own challenges.
The industry context
87% of the directly authorised Financial Advice firms in the UK (that’s over 4,000 businesses – Source NextWealth 2024) have between 1 and 5 Advisers. These business owners typically started their firms driven by:
- A desire to do things differently
- A passionate drive to look after their clients
This explains why many are hesitant to sell to large consolidators. The concern? Their carefully built client relationships and business culture might get lost in a larger organisation.
Appointing a successor
This is leading many towards option 3 – appointing a successor. Initially this is usually focused on client handovers as the business grows and the founder needs to focus on new clients and business development. However, more and more this is evolving into planning for the successor(s) to take over the running and ultimately ownership of the firm.
The challenges
Succession is such a wonderful idea in practice. It provides continuity for clients and team and continues the legacy of the founder for another generation. But of course this route comes with challenges too. Things like;
- Finding the right person / people
- Retaining them
- Managing expectations
- Letting go of control
- Continuous comfort zone expansion
And that’s before we get into financial negotiations, ownership transfer and communicating with clients!
Three keys to successful succession
There are three fundamentals that I think create a great foundation for a successful succession. While it’s never easy, I have witnessed each done well and not so well, and the huge difference in outcomes in each case.
1. Open, honest communication
In my experience, this is the most important thing in any business and yet in practice very few are achieving it.
Poor communication leads to misunderstandings, unmet expectations, unresolved conflicts and much more. Often a lack of honest communication is the root cause of many other problems. For example, I’ve heard a lack of honesty and transparency cited by job applicants as a reason for leaving a previous business more times than I can count.
Open, honest communication sounds so obvious. The trouble is that it’s in that “simple but not easy” camp that requires deliberate attention and hard work.
“Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.”
Viktor Frankl
The reason that most of us struggle with honest, open communication is to do with what’s going on between our own ears. Worries about how we will be perceived, concerns and assumptions about how the other person will react and so much more.
The thing that I’ve seen making the biggest difference in firms is external support in three areas:
Professional coaching – Those managing to have the hard conversations and communicate honestly are often using coaches (sometimes therapists even) to work through their personal challenges.
Mediation – Sometimes an external party can help to mediate discussions that otherwise get nowhere, perhaps resulting in arguments or avoidance.
Training in feedback and healthy conflict – Many of us are not naturally good at navigating these areas, but they are skills that can be taught and learned.
Ultimately, where businesses are navigating smoothly through the ups and downs of transition, all parties are committed to personal, as well as professional, growth and development.
2. Strong frameworks
As an ex-Operations Director, I do love a process! While having standard operating practices is incredibly important, in this context, there are two frameworks that I think are fundamental:
- How you meet
- How you make decisions
Better meetings
In most businesses, a good proportion of meetings are time consuming and ineffective. I often hear stories of meetings that cover the same old ground time and time again, where a few voices dominate, and things rarely get resolved well.
Get your meetings right and a lot can change for you. In his book Brave New Work, Aaron Dignan suggests that most organisations don’t even spend 30 minutes a week thinking about how they meet and interact. I think he’s being generous – I would say most don’t spend 30 minutes a year!
A meeting should elicit everyone’s best thinking in order that decisions can be made that mean work outside the meetings is more effective. I recommend that you:
- Define clear mechanics (how, where, when, who)
- Meet with a purpose – define the question you want to answer
- Ensure everyone contributes, in turn on every agenda item
- Eliminate interruptions completely (that’s spoken, eye rolling, face pulling and tech – everything). Pay attention to each other.
Decision making
How do you make decisions in your business? Could others in the firm replicate the process that you go through? Could your successor?
When there is a clear and robust decision making process in place, it gives successors a framework to work out what to do next in new situations. It also gives founders confidence that when they’re not involved (and perhaps don’t always agree with the output), decisions are being made well so they can stay out of the way.
A great place to start is by using your company values as a practical set of guidelines for navigating all decisions in the business. Disneyworld are a great example of this. Their values are:
- Safety
- Courtesy
- Show
- Efficiency
These values, in priority order, guide every decision at every level. For example, if someone notices a guest at Disneyworld trying to do something dangerous – they know that, if necessary, they no longer have to be courteous and put on a show. The first priority is the safety of that guest. As soon as they are safe, courtesy kicks back in, and the show must go on!
Clear and actionable by every team member at every level relating to the decisions they need to make on a daily basis.
3. Quality mentorship
It’s all too common that I hear business owners and leaders have lost team members after investing significant time and effort into their development. “Just as they’re getting close to starting to repay that investment, they’ve upped and left.”
On the flip side, I’ve also heard the frustrations from the other side of the fence. Typically something like:
“I was promised that I would be taking on their clients / seeing new clients / in the management team / paid more / progressing in some other way …. by now.”
and / or
“They were just too controlling, if I didn’t do things their way it was never good enough so I felt completely stifled.”
When the expectation from training and mentorship is some variation of “do as I do” all of the above can come about.
Really high quality mentorship aims to build autonomy in the mentee and give them the tools to think things through for themselves. Get that right, and you will see the following benefits:
- Staff retention (leading to huge financial savings)
- Time saving and better decision making
- Higher levels of trust between mentor and mentee
- Greater levels of ease when navigating conflict
- The relationship is productive, inspiring and enjoyable for both parties
Key mentorship principles
Great mentorship allows the mentee to learn from the mentor in a way that keeps them both thinking well. Key principles are:
- Coach don’t solve
- Share experiences, including mistakes and learnings. Don’t give advice
- Recognise assumptions
- Build confidence in your mentee
Navigating the stormy seas
Succession planning is never simple and the seas will get stormy at times! But with these foundations in place, you can navigate the challenges more effectively. The key is creating structures that support both the founder and successor through the transition while maintaining the firm’s core values and client relationships.
Whether you’re at the stage of clients being handed over, or moving towards a transfer of ownership, there is a lot that we can do to make the sailing smoother.
If you’re interested in exploring how I can help with your succession planning, please get in touch, or book in here for a chat.
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