Succession Planning Is About More Than Retirement

Journal of Financial Planning: February 2021


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French philosopher and sociologist Auguste Comte (1798-1857) observed that, “Demography is destiny.”

The impact of baby boomers on consumer products, housing, social trends, fads, spending patterns, investment markets, travel, etc., has been transformative and will continue to be so. The first boomers born in 1946 turn 75 in 2021. The last boomers, circa 1964, turn age 57 in 2021. By the end of 2029, all baby boomers—currently, about 73 million people—will be 65 or older. Financial life transitions surrounding retirement and life post-career continue as a focus for advisers.

On December 12, 1969, 13 individuals convened at a hotel near Chicago’s O’Hare airport to lay the groundwork for what evolved as the profession of financial planning. In the 52-year journey from 1969 to 2021, a funny thing happened to the innovators, entrepreneurs, and practitioners who pioneered what we do today: we grew older! J.D. Power’s 2019 U.S. Financial Advisor Satisfaction Study pegged the average age of financial advisers at 55, with approximately 20 percent of advisers 65 or older. That’s just advisers. RIA consulting firm and investment bank, DeVoe & Company, notes that the average RIA owner is in his or her early 60s.

Given our “age wave,” how are advisers doing preparing for retirement? Not so hot. A majority of advisory owners lack a succession plan, a crucial element in building a firm with marketable and harvestable value. A 2018 Financial Planning Association (FPA) and Janus Henderson Investors study indicated that 73 percent of advisers lack a formal succession plan. Only 13 percent of those managing less than $50 million in assets have a formal plan. Of larger firm owners with assets of at least $500 million under management, 40 percent have no plan.

For some, planning for retirement after a life of work isn’t easy, but they view this as a major planning opportunity. Focus on your own transition planning while seizing opportunities related to closely held business owners in your target area.

Succession Planning Reframed

After selling and transitioning my practice after 40 years as an independent adviser, an introduction to Exit Planning Institute (EPI) and attainment of the Certified Exit Planning Advisor (CEPA) designation opened new vistas as succession planning assumed added attributes for both advisers and business owners at large.

Often, emphasis in retirement planning is placed on “making money last.” Mitch Anthony, author of The New Retirementality and a thought leader in financial life planning, declared that in retirement “one should have enough money to sleep well at night, but a purpose to wake up to in the morning.” When we ask clients what they envision in retirement, they cite travel, golf, family gatherings, a second home, etc. When every day is a vacation day, concepts of time, meaning, purpose, and fulfillment take on new dimensions. That’s especially true for business owners whose primary focus, for better or worse, is work. When work stops, what begins?

Bereavement counselor Amy Florian, CEO of Corgenius, shows advisers how to guide clients though difficult transitions, especially those involving loss of loved ones. We don’t like to talk about death, but for many business owners, discussions about succession bring on a loss of purpose and also a loss of focused energy, personal growth, and achievement. EPI reports that many owners who sold their business became bored.          

In 2018, EPI published a Georgia market study, The State of Owner Readiness. While the data on transition planning preparedness applies to owners of lower- to middle-market firms in Georgia, the statistics approximate other areas and national averages. Of the firms surveyed, 60 percent had annual sales of less than $5 million; 28 percent had revenues from $5 to $100 million; and 12 percent had revenues of $100 million plus. In all cases, the current owner founded the company.

Owners acknowledged “readiness” as important, yet 47 percent have done no planning whatsoever. About 50 percent of owners know how much they need to fund post-business life plans; however, 80 percent have not undergone preliminary diligence to position for a successful transition. Seventy-two percent of owners have no plan in case of a forced exit due to one or more of the 5D’s—death, disability, divorce, disaster, or disagreement. Of Georgia owners, 52 percent were over age 60. Fifty-three percent of owners intend to transition in the next one to 10 years.

Consider the implications for intergenerational financial planning. Seventy-five percent of firms were family owned; 8 percent were a combination of family and outside ownership.

In many cases, the business is the owner’s primary investment and the value of the business upon monetization of one’s life work is likely to be key to financial independence post-sale. The owner may acknowledge that he or she needs an exit or succession plan, but they really want to focus on increasing revenue and growing the value of the company.

Growth + Continuity = Value Acceleration

Many business owners have no real idea what their business is worth. Planners may have heard that someone sold their practice for X times gross revenue, or some number based on re-casted Earnings Before Interest, Taxes, Depreciation, Amortization (EBITDA). But companies with the exact same bottom-line EBITDA may sell for very different multiples based on a range of factors involving both tangible and intangible assets.

Christopher M. Snider, president of Exit Planning Institute, says that another opportunity for value acceleration lies in improvements to intangible capital. Intangible assets are the sum total of a firm’s intellectual capital and may be divided into four capitals: human (value of talent); structural (value of systems and intellectual property); customer (value of client relationships); and social (value of brand and culture).1

J.D. Power noted that our profession is facing a generational crisis. The average age of advisers is around 55, with about one-fifth of those 65 or older. When these advisers retire, firms that effectively attract, develop, and retain new advisory talent will succeed.2

In today’s wired world, younger-generation employees are on social media, comparing notes with friends and potentially looking for their next gig. Millennials, those born between 1981 and 1996 and ranging in age between 25 and 40 in 2021, are an increasingly larger share of a company’s work force. Gallup reports that only 29 percent of millennial employees are engaged in their work, “with the remaining 71 percent either not engaged or actively disengaged.” Further, “six in 10 millennials say they’re open to different job opportunities, and only 50 percent plan to be with their company one year from now.”3

Many young workers today want more than a job; they want a cause. They want to feel like what they’re doing contributes to society, and that is especially important in the field of financial life transitions counseling. They want to know what’s expected of them, and their path to growth and advancement. Some will seek a path to ownership. They don’t want a “yearly progress report.” They want constant feedback and coaching.

Gallup’s report noted, “Regardless of generation, employees need to know what’s expected of them. It’s extremely stressful for any worker to lack an understanding or awareness of job responsibilities.” They want performance goals and priorities established. They seek, desire, and accept accountability. 4

Maria C. Forbes, chief engagement officer,, emphasizes, “It’s important as a leader to recognize that understanding how one’s contributions impact the bigger picture is not a generational issue—it’s a people issue! People want to feel valued, to have a voice in the success of the organization, knowing their investment of time and energy means more than just a paycheck. Everyone wants to remain relevant and avoid the stress of an outdated or incomplete knowledge base. Every member of your team needs to know upfront that the organization to which they’ve committed is going to encourage their creativity and development and support them in a manner that will avoid boredom and burn-out.”5 

Forbes noted that new hires need to know the pathway to success on day one. Onboarding is more than an upfront “first-month” activity. For too many firms, onboarding is a paperwork shuffle to get new hires enrolled in benefit programs, along with a “meet and greet” with other employees and key management personnel.

Onboarding as an Ongoing Process

Onboarding must be an ongoing development process. It should involve assessments like Kolbe, and/or Gallup Clifton StrengthsFinder to get an understanding of the person’s unique abilities, their “internal MO” and talent themes, so they are aligned with the envisioned role. You want to understand their singular personality, who they are, why they do what they do, and how they will build effective relationships with the other team members. Tools like Keirsey Temperament Sorter may be used in conjunction with other diagnostics to gauge how the person’s emotional temperament fits into your long-term vision of enterprise success. Employee costs are a major investment. As an employer, you should engage outside consulting resources to help design and implement an “employee engagement and development system.”

As the record job boom gathered steam, 54 percent of small business owners reported finding few or no qualified workers. In the post-COVID-19 aftermath and recovery, there will be more job seekers. Will they be qualified based on your needs as an owner and manager? Will they fit your envisioned role?

In a merger, planners or others with certain skills or other attributes such as specialized knowledge or a unique niche that could bring special synergies to an acquiring firm add value, enhancing buyout terms.

Embracing Technology for Structural Capital

Structural capital involves systems and processes. Talented teams need effective systems and processes. The COVID-19 work-from-home mandate spurred thinking about working remotely and the functions of existing office space.

Homebound advisers had to learn how to access Zoom or other technologies for conference calls with clients. While in-person, face-to-face engagement is superior to cyberspace for truly effective client communications (especially during the appreciative inquiry phase of client development or when challenging life transitions are faced), advisers strive for professional-looking virtual meetings. They may wish to have a “virtual room” in their office and home with a high-quality camera and microphone, and with effective lighting such as the light rings used on American Idol. Raef Lee of SEI Practically Speaking suggests a nice backdrop behind the adviser—and for offices, an adjustable-height desk that could be used by different advisers.7 

Vendors, broker/dealers, RIAs, firm management, and others seek to upgrade all technology tools and processes that make adviser and support personnel tasks more efficient. J.D. Power reports that roughly 26 percent of financial advisers don’t use smartphone-friendly tools and 49 percent don’t use tablet-friendly tools.8

Social media has been a sticking point due to regulatory constraints, yet this must be reconsidered. J.D. Power notes that advisers aren’t taking advantage of social media, adding that 42 percent of advisers under age 40 say their firm doesn’t let them use social media to communicate with clients or prospects, even though 64 percent of advisers in that age group who have used social media say it helped them strengthen client relationships and 47 percent say it has directly helped them win new business.9

Technology is important for adviser recruiting and retention. J.D. Power found that higher-quality technology led to loyalty and advocacy. Among advisers under 40 who are highly satisfied with their firm’s technology, 82 percent say they “definitely will” remain with the firm and 76 percent will recommend their company to others. Conversely, of those dissatisfied with firm technology, only 33 percent said they’d stay and only 29 percent would recommend their company.10

Focusing on Client Capital

Client capital—how clients pay for services—is a significant component of firm value. Recurring revenues such as asset management fees count more than one-time transactional revenues. A firm with a client base spread across age ranges enhances value. A high concentration of older clients with qualified money subject to Required Minimum Distribution (RMD) mandates and lifestyle needs can cause a drain on assets under management (AUM) balances.

Advisers should have a relationship with the client’s adult children. According to InvestmentNews, 66 percent of children fire their parent’s financial adviser after they receive an inheritance.11  A multi-generational practice has added value.

Consistent referrals from existing clients are valued, as are client appreciation and loyalty-building events and activities. Location of the practice relative to area demographics and ease of access impacts value. A practice in an area with a density of more affluent clients may command a higher value compared to a low population area with less affluent clients.

If a few clients deliver a disproportionate percentage of revenues, that subtracts from value [e.g., a concentration of very large AUM accounts such as a trust, pension fund, or company 401(k)]. Diversified revenue sources enhance value.

Are client relationships long-term and transferable? Most sale or merger transactions require that certain metrics be met as to transferability of accounts and numbers of clients relative to payments beyond the down payment.

Social capital reflects “your culture, your brand, the way your team works, the rhythm of the day-to-day operations and communications, the way you communicate with customers,” noted Larry Bossidy and Ram Charan in their book, Execution: The Discipline of Getting Things Done.12 Buyers want a team in place that can move forward and execute plans and adapt to changes in the business environment once the current leader (owner) moves on. Can your practice progress, prosper, and grow without you? Owner dependence detracts from value.

If you sell your practice, target selling when the company is profitable and the revenue outlook is strong. You can’t wait until “you’re not having fun” and revenues are stagnating.

The economy and practice revenues are in a post-COVID-19 rebuilding stage. How does a recovery cycle mesh with your plans for value enhancement and harvesting of value?

What Do You Really Want?

The entrepreneurs who built our profession had one thing in common—a desire for control over their own destinies. Current owners, and those joining established firms with an eye toward ownership, have the same desire. While some may be willing to accept a check on the sale of their ownership interest and walk out the door, an abrupt exit is not what most owners want.

Team-based ensemble practices are growing in popularity. A team-centric model gives an independent-minded owner control over how he or she departs from the business and the time period involved; control over the pace at which workload is surrendered; and time to groom successors and be confident that a successor shares the same values, work ethic, and standard of fiduciary care for clients.

You will exit your practice, your business, and your profession someday, somehow. Enjoy the journey! 

Lewis J. Walker, CFP®, CRC®, CEPA®, consults with closely held business owners on issues surrounding succession planning and value-acceleration strategies. He serves as vice-chairman of the Board of SFA Holdings Inc., a diversified financial services firm in Atlanta, Ga. Walker is a past president of the Institute for Certified Financial Planners (ICFP), which merged into the Financial Planning Association (FPA) in 2000.


  1. See Walking to Destiny: 11 Actions An Owner MUST Take To Rapidly Grow Value & Unlock Wealth by Christopher M. Snider.
  2. See the J.D. Power press release from July 9, 2019 at
  3. See “Few Millennials Are Engaged at Work,” by Brandon Rigoni and Bailey Nelson at
  4. Ibid.
  5. See “Avoid a First Term Impression Fumble to Ensure Long-Term Success,” a blog post by Maria C. Forbes, at
  6. See the January 4, 2018, press release from the National Federation of Independent Business “As Small Business Confidence Surges, Worker Shortage and Wage Pressure Intensify,” at
  7. As quoted in Weekend Reading for Financial Planners, May 23-24, 2020, by Michael Kitces.
  8. See Endnote. No. 2.
  9. Ibid.
  10. Ibid.
  11. See “The Great Wealth Transfer is Coming, Putting Advisers at Risk,” Liz Skinner, InvestmentNews at
  12. See Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan.
Succession Planning
Professional role
Estate Planner
Career stage
Learning / Aspiring