It’s probably one of the biggest decisions and transitions you’ll make in your life as an advisor. Thinking of a successor. Do you have a successor in mind? How do you actually implement?

Stage 1 is identifying a successor. Make sure that you are selecting a successor for your practice who aligns with your business. Do your financial philosophies align? Do you spend money the same way? Do you believe in the same approaches? It doesn’t have to be the exact same across the board, but there has to be a deep connection of values.

Stage 2 is integrating your successor into your practice. There are going to be 10 or 15 ideas that you want to implement. Pick one to three things that align with your strategy, your values and your philosophies that you can implement easily as soon as you get back to your office.

So you’ve found someone who is a good potential future partner for you. What do you do before you actually get into the process? I’m going to take you through some questions to get you started. The first one is How do I want to spend my time in three to five years? Are you going to be spending more time with your grandkids? Do you want to spend more time doing what you love? Or will you continue to be in the business? Maybe you’ll just whittle your book down to 50 favorite clients, and you are just going to keep servicing them and being there for them.

When you are thinking about post-transition and once you have gotten through this transition period, what does success look like? How do you define that? Write it down so it lodges in your memory.

Another question to think about is What is the one thing that would put the brakes on this? Imagine you picked your successor. You are a year into it, and things start to break down. What is the one thing that if you see it happening, you are pulling the chute? Is it something values-based? Is it how your successor is making money decisions? Is it how they are treating your clients? Think long and hard on that, and write it down. And when you have your successor, don’t be afraid to share all this. These are things that you should be transparent on. They need to be aware of what’s on your mind.

There are essentially three options to choosing your successor.

First, maybe they start off as a licensed operations support team member. That’s someone who’s more administrative.
The second option is an associate advisor working a client segment on their own block. This is someone who comes into your business and has some experience already.
Option three is they come in as a partner. They have an existing firm themselves. They are much more experienced. You’ve been working together. You’ve been friends in the business.

The profile of each of these is very different, but those are essentially the three approaches.

This is your to-do list:

Step 1: Decide on the approach, and clearly define the roles. Give time to the process. Which approach works for you? It is up to you to define the role. This is not typically a collaborative effort with your successor.

Step 2: Set the expectations. You have to define the role and leverage your team. Maybe you work with a mentor in the MDRT mentoring program. Maybe you work with an MGA or a business coach. You don’t have to do it alone.

Define the operational and financial integration. This is more applicable for options two and three. Option one is a licensed operations support team member. If you are having success, they share in the success.

Step 3: Clearly define, agree on and document objectives. What does success look like after 90 days, six months, one year and three years? This is critical. If you think about your transition date as a goal date, what are all the things that have to happen in order to have a successful outcome? It’s just like any goal that you set. It’s better to have milestones and checkpoints along the way.

If things aren’t going as you planned, it also creates a system and a process that you can point to as an agreement. And this is formalized. These are agreements that you should get in writing and that you agree to much like you create an annual business plan for your business.

Let’s talk about a client engagement plan. Think about how important it is for your clients. When it’s their finances, you have to make sure that you communicate in a way that makes them feel valued, that makes them feel special and that they understand what to expect next. Nobody likes to be surprised.

So you’ve got legal documents, and you’ve got your buy-sell agreement. You’ve created a business plan around this. Now you need to actually have a conversation with your successor. You are going to have different styles, and that’s OK, but identify it early on.

The other key point is how you are going to work together. It needs to be clearly defined. Create systems for communication — who, what, when and where. This is so important because if you create these systems in advance and things go off the rails, you can point to those systems for communication.

Now, you’ve got two very established people trying to merge together somehow. You have to be emotionally and psychologically open to looking at other options and other people’s ways of doing things. This is where it’s really important to create systems for communication.

What happens if things don’t go well? Of course, you feel like you chose the right successor based on values, based on financial philosophies, based on all of the things that you’ve applied weight and importance to, but they are not delivering on outcomes. So what do you do? You have to have courageous conversations.

One of the phrases I like best is “I don’t believe we’re moving in a direction that’s productive for us. Can we try something different?” You’ve brought the emotion out of it. You’ve asked permission to try something different. I don’t think anybody’s really going to say no, right? The answer to that is really only yes. Those are important conversations to have.

How do you move forward? Once you’ve set the expectation upfront, it’s much easier to point back to that document and say, “Hey, we agreed on this. And I’m not seeing that your behavior is aligning with what we agreed to. Is there something that I’m doing that isn’t creating a trusting environment? Is there something that you’re seeing that you don’t like? How do we find a way forward?” It’s always coming back to that conversation because that’s the ultimate goal for everyone.

Be open to their viewpoints and feedback. Be open to others’ perspectives. Be open to other ways of getting to the same outcome. It’s the only way for a productive conversation to move ahead.

I would be remiss if I didn’t say to you that you need to seek legal counsel. It’s like any relationship that you’re entering into. This is a huge transition, especially if you are the tenured advisor who has built a very successful practice. It’s very important to seek legal counsel.

The final step, of course, is the final integration. You are no longer the principal. How do you feel? You are feeling relieved. That’s very positive. That’s good. You’re ready. So, you are no longer the principal. Your successor owns and operates the business as a principal. That’s the final stage. I hope that you found value out of today.

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