Forgoing the creation of a succession strategy can prevent you, a successful Advisor, from earning financial and emotional rewards that you deserve after years of work. As a relationship-based business, most Advisors find it very difficult to stop working, especially if there’s no family member or close friends that you can hand your business off to. The result of putting off planning often results in clients ending up with better succession planning than the Advisor who counsels them.
According to Roland Chan, founder and CEO of Find BoB Ltd., the average independent Advisor in Canada is 59 years old, yet, 80% of them do not have a written succession plan. For some Advisors, the difficulty of finding an adequate successor, the impression that valuations are too low, or the daunting feeling of beginning the succession planning process are all possible reasons for why they have no solid succession plan in place.
Despite these hindrances, 90% of Advisors believe they have an ethical obligation to their clients to create a succession plan. Benecaid has outlined ways to begin succession planning and how to sell or leverage your work before retiring.
Find out what the practice is worth
The most important succession planning step is obtaining a proper valuation of your business. If you’re an independent insurance Advisor, your book of business can sometimes represent 40 years of work – it’s important to maximize your book of business valuation by having a CRM (not a paper filing system) and by selling more insurance. The best price for the business will probably be obtained when the Advisor is alive and well, says Wouters, so it is important to establish a plan for succession. Get a professional evaluation to find out what the practice is really worth.
Speak with and learn from other Advisors who have already gone through the retirement process. Many advise that retirees use their knowledge to become a mentor or coach for those who are entering the field – this will benefit everybody and helps ease the transition process. Check out a program called “What’s coming up next” by the Independent Financial Brokers of Canada to help you prepare emotionally. (Don’t know if you want to mention this or not?)
Establish steps to transfer the business and put it in writing
It is highly advisable for you to establish a purchase-and-sale agreement with a colleague that is active in the business. An internal transfer is considered the best option because it leaves the book to another Advisor in the same organization, making it less disruptive to the company as a whole. Mentoring plays a huge part in this process and will make the transferring of the business much easier. Working side by side, answering questions, introducing clients, sitting in on appoints and reviewing client files is the best training an established Advisor can give to a junior Advisor.
It’s never too early to start succession planning
As everyone in the insurance industry knows, it’s never too early to start planning. Leave yourself plenty of time when choosing an exit plan that works for you. After all, this is a decision that will directly impact your future. A popular exit plan that many Advisors end up choosing is a partial exit, in which the Advisor slows down and keeps a small portion of their book, dividing the rest up with associates or selling it. Now, get planning!
If you are in the stages of your career where succession planning has made it to the top of your to-do list, it’s important to take the proper steps to ensure your business and all of your clients will be properly looked after.