Log in to access resources reserved for MDRT members.
  • Learn
  • >
  • My personal journey toward legacy planning
My personal journey toward legacy planning
My personal journey toward legacy planning

Sep 01 2023 / Round the Table Magazine

My personal journey toward legacy planning

A dire diagnosis prompts advisor to plan for continuity and protect his family.

Topics Covered

I thought I would have plenty of time to think about the continuity of my practice, but when I faced a sudden and potentially life-limiting health crisis, I realized how ill-prepared I was to protect my family and avoid confusion and disruption in my practice.

My medical emergency began after I went to a local urgent care center to find the cause of the pain I had been feeling in my stomach for a few days. To my dismay, the doctor said I should immediately go to the emergency room for a CT scan. Several hours later, a doctor explained that the cause of my pain likely was due to a thickening in the wall of my small intestine, and, to my initial relief, it probably was just a virus. I thought I received a relatively clean bill of health, but then the doctor continued and shared very disturbing news. In addition to the virus, the doctors saw a mass of tissue in my stomach. “We think it is a GIST — also known as a gastrointestinal stromal tumor,” the doctor explained. “I’m going to have the surgical team come over and probably admit you, and we’ll talk about what comes next.”

As I laid on a gurney, waiting to learn more, I picked up my phone and Googled this condition. What I learned wasn’t comforting. Only 1 out of 120,000 people a year in the U.S. is afflicted with GIST tumors, and doctors don’t know the cause. They do know that these tumors start small and local but grow, spread and eventually can become malignant. This type of tumor doesn’t respond to chemotherapy or radiation, so surgery is the only recourse, if it hasn’t spread. It’s not something you ever want to face.

As I considered which path would create the greatest value for my family in the event of my demise, I realized I needed to examine what makes my practice valuable and who would be the best candidate.

The will is not enough

I started thinking about what I had done to protect my family. Yes, my wife, Stacia, and I had updated our wills about a year before the pandemic and put many safeguards in place, but I realized that I had never seriously considered a succession or continuity plan for my business. What would happen if I died from a surgical complication, if the recovery process proved to be more complicated than expected or if the doctors found that the tumor had spread?

In our family, the governance of my business is run by the power of attorney provisions in my will. That means Stacia would inherit and run the company, but we had never really talked about whether she would want to. Would she even be able to?

I quickly realized this wasn’t a viable option, and I looked to build a governance model based on the concepts found in a book called “Traction.” The book discusses how a successful business requires two individuals — a “visionary” who has the vision and ability to run a company, and an “integrator” who works in cohesion with the visionary to oversee all the operational aspects of the practice. 

Ultimately, I determined that my family would need someone to serve as their advocate in case any of these three unwanted outcomes occurred. I thought about the qualities an advocate should have. Should they know my product portfolio? Should they have stronger operational skills that complement my visionary skills? Most importantly, would the advocate be acceptable to my wife? I identified three individuals in the industry, determined which one I thought would best act as an advocate for my family, contacted him, and he agreed to assume this role if needed. 

Preparing for the worst

I realized that if surgery didn’t go well, I needed to determine who my estate should sell the company to and whether the best option was to sell to an internal team member or to an external organization. At that time, I had 11 people working for me with a core leadership team of three, my right hand, who has been with me for 27 years, and two other individuals who have each been with me for more than two decades. We all complement each other, and I wondered if I would be dishonoring my senior team by not giving them the opportunity to purchase and manage my company.

As I considered which path would create the greatest value for my family in the event of my demise, I realized I needed to examine what makes my practice valuable and who would be the best candidate. During my career, I had the good fortune of selling thousands of individual policies that generate a constant stream of passive income, like AUM. Selling the company to my team would provide continuity of service from day one. However, I also realized that my entire career had been built around offering one product to health care institutions across the country. Would it be best to have my company purchased by one of my competitors who already has the business experience, staff and systems to absorb my firm? Finally, I considered the value of our relationships with countless individuals and organizations. Would a company that offers a wider range of products and services see value in my block of individual policies, or would a firm specializing in group and executive benefits find my institutional relationships appealing?

All important questions to answer, and I started by looking at an internal sale. I asked myself why my right hand and I work so well together. The answer is because we complement each other — I’m the vision, and he is the stability. Then I asked myself the question that anyone looking for a new principal should ask: Do you want someone with a vision to drive the business forward, or are you just looking for someone to maintain the company? The answer will differ depending on the desired outcome — continue the business or sell and dissolve it. But I wondered how the staff would receive my right hand if he became the company leader. I recalled an exercise my company had gone through recently when we were asked by our HR consultant “What’s the one word that describes you in this company?” The word that immediately came to my mind was “drive.” My right hand’s word was “calm.” Having a manager who makes sure our promises are being fulfilled and business processes run smoothly is invaluable. But would this successor be able to take care of the staff who’s been with me for years? I also had to ask the tough questions like whether he was ready to oversee it all? If not, who could join the firm and how would that impact the stability and value of the firm? Also, could my right hand drive the business forward, and did he have the financial means to buy my company?

As I tried to work through these questions in the limited time before my operations, I concluded that the only viable move for me and my family if I didn’t survive was to sell the company to an external organization in such a way that my team would be protected and that they would have some economic interest from the sale. We had to look outside the company for a solution. But who knows my marketplace, and who can do this?

Preparing for possible sale

Concurrently, I built a second team that I refer to as my dissolution team, which would spring into action to find someone to buy my company if it needed to be sold. I picked two people for these consulting roles, one who knows my market and my competitors and one who is a tough negotiator. If necessary, they would be the ones bringing an offer to my advocate who would then bring it to my wife. 

The first thing I did was figure out the value of my company. For this, I contracted two companies to get competing bids. The second thing we looked at was our communication to key clients and centers of influence to make sure that if something happens to me, they know what’s going on.

Staff is the next consideration. The value of a company is the staff. What if they think, David’s gone or David’s out for six months, and I’ve got to work for this new guy, so I may be looking for another job? So, we started talking to our staff more and wanted them to understand the steps we are taking. We addressed these issues through a weekly meeting to develop an operational flowchart for every single process in the company, who does it, who they report to and who is going to manage them.

I found that the most important thing in succession planning is to be honest with staff. That means having candid conversations like I did with my right hand. He needed to understand what I’m thinking, and I needed to ask him, “Do you want to do it? What are your concerns?” If he said no, then I want to take steps to protect him and the company. If we sold the company, how could I protect him from a future purchaser?

By taking these steps, you protect your family and your business. There’s no reason that any of us shouldn’t do this. Do you really have as much time as you think you have? I certainly thought so, but I’m glad that I am still here working and able to share this message.

Find resources about business continuity at mdrt.org/decisiontree.