Succession planning within a firm is complicated, with a lot riding on it for both generations. To give us a glimpse into what makes or breaks a succession plan, Hannah Moore, CFP®, sat down with two young planners who are in the thick of it. Kevin Cassidy, CFP®, is the Next Gen director at FPA Houston and is in the midst of succession at Veritas Wealth Management. Brooklyn Brock, CFP®, CEPA®, ChFC®, CKA®, is the founder of Ellevate, a financial planning firm for advisors that specializes in exit coaching. Together, Kevin and Brooklyn share what they’ve learned about the pitfalls that crop up and approaches that work when you’re taking the reins of an established company.

The dream succession

Kevin Cassidy, CFP®, is living the “dream succession plan.” After leaving a career in chemical engineering, he earned his CFP® and started working as a planner. A couple of moves later, he joined Veritas, where two of the partners were in their 80s and preparing their exit. Kevin was expected to grow his own book of business, and if he proved capable, they would ask him to be part of the succession plan. 

They developed a plan centered on getting him in front of the transitioning clients right away. One of the established advisors would partner with him to prepare him to absorb the practice.

“There are soft and hard parts to the timeline,” Kevin says, “with the soft part being my introduction to all of the clients and making sure that they're comfortable working with both of us and that the other advisors are happy and confident that I’ll keep the clients a priority.” For the hard side, there's a date that the client rep codes actually change, and that will signal who’s actually running the practice.

The transitioned clients will move onto a joint rep code, where Kevin will derive his equity, while his own clients will always belong to him. There will be an earn out for the retiring advisors. Kevin says, “It really feels like the best possible world for everyone involved, in that it keeps the advisors engaged and wanting me to succeed.”

The trouble with succession plans

In contrast with Kevin’s clear path to ownership, many of us end up waiting and hoping for transitions that never come.

Brooklyn worked for twelve years at her family’s financial planning firm. After helping to manage the transition from her grandfather to her father and uncle, and stepping in again when another partner had a health event that made him retire suddenly, she got tired of waiting for an ownership offer. So, she struck off to find success on her own.

At an XYPN conference, Brooklyn heard Micheal Kitces talk about how the profession that needed financial planning most was planning itself. She says, “I looked at my background and everything that I've done, and thought, ‘I could do this for the rest of my life and be happy.’ So I launched my firm. I do exit coaching for financial advisors. It’s been a blast.”

One thing Brooklyn has noticed in her work is that it’s hard to get the succession conversation started. She says, “That's a difficult barrier to overcome. You have all of these questions that need answers.”

Kevin agrees that having those conversations is tricky. He shared that one of the most challenging parts of his succession is that the experienced advisors in his firm have been helping people retire all their lives. They’ve been doing it well and have loved what they're doing, and they've absolutely been trying to avoid their own retirement.

Brooklyn adds that on top of not wanting to leave, it’s difficult for many advisors to feel safe opening up to the young guard. For most in this profession, you keep the “secrets” of your success very close to your chest. This leads many an exiting advisor to clam up about their process and wait for their successor to prove they can meet their unspoken expectations.

Sometimes, owners just can’t let go. They won’t introduce their successor to their clients or change anything in their business to facilitate the transition. Brooklyn says, “They'll just say, okay successor, you are here until I die. And when I die, you can change things.”

A third issue that can interfere with a succession plan is the timeline. It’s not uncommon for the exiting advisor to push their retirement deadline further and further back, which is what happened with Brooklyn’s grandfather.

“It ended up causing a lot more problems than it was adding value at the end of the day. So they had to make some tough decisions. Seeing eye to eye on the timeline is really difficult.”

Bridging the gap between generational points of view

When her grandfather was reluctant to let go of his business, Brooklyn learned how important it is to understand the perspective of the person who’s exiting. What better way to do that than by approaching them as you would a client? 

She says, “One of the solutions that my family found was doing a financial plan for my granddad to help them see that, ‘Okay, I can't afford to retire, the sale price of the business is fair, and I have what I need to provide for me and my spouse.’” 

Kevin says he stays conscious of the generation gap and knows the onus is on him to bridge it.

“For advisors who are in their 70s and 80s,” he says, “they have a certain expectation of how someone presents themselves. Their clients reflect that as well. You have to have all the technical skills, but you also need to communicate in the codes of responsibility and respect that older clients grew up with and are more familiar with.”

Kevin sees a direct connection between adjusting his language and demeanour to make his clients feel comfortable and his responsibility to do what’s best for them. He respects the fact that a lot of their investments and the strategies behind them have been in place for decades. When he makes recommendations, he’s careful to consider the client’s long-term history and their tolerance of risk and to explain how the change is in their best interest.

He explained that people don't care how much you know, until they know how much you care. If the clients can tell that we are really being their fiduciary, that we are looking out for their best interests, that will span a lot of bridges.

For planners who aspire to purchase a firm one day, Brooklyn sums it up: “It’s preferable that you have your own book that you can fall back on if the transition goes sideways. And at the same time, you have to be giving just as much time and attention to the acquisition as you do to building your book. It's like twice as much as anyone should be expected to do, but that's what it takes to do it well and to have a high client retention ratio. We all want to serve clients well, at the end of the day.

What You’ll Learn:

  • What the ideal succession plan looks like
  • What usually goes wrong
  • How you can bridge the generational gap for succession success
  • How to handle it when successions don’t go as planned

In this episode of YAFPNW, Hannah Moore, CFP®, Kevin Cassidy, CFP®, and Brooklyn Brock, CFP®, CEPA®, ChFC®, CKA® talk about:

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