SUCCESSION PLANNING
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Tips for Preparing the Next Generation of RIA Owners
By Christina Traurig, CFP®, MBA
Succession planning is a topic many firm owners recognize as essential but often struggle to prioritize. It’s understandable—when you're focused on serving clients and growing your business, the thought of handing over the reins of the business you created, shaped, and led over many years can feel distant or even overwhelming. But the reality is that thoughtful succession planning is one of the most critical aspects of running a successful, sustainable firm.
Having gone through this process myself as the successor, I’ve learned valuable lessons about preparing the next generation of firm owners. Here’s what I believe owners should focus on to create a smooth transition for future leaders.
Start Planning Sooner Than You Think
One of the biggest misconceptions about succession planning is that it can wait until you’re a few years away from retiring. In reality, the earlier you start, the better positioned your firm will be for a seamless transition. The founders of Cornerstone Financial Planning began structuring their succession plan 10 years before retirement!
A strong succession plan isn’t just about choosing and developing a successor (more on that below)—it’s about building a firm that can thrive without you. Of course, you need to have a good business operations structure and strong client relationships, but even more than that a solid company culture. If you haven't created your mission, vision, and values statements yet, that's a great place to start. This is the foundation of your company culture, what you will use to attract the right employees and future owners, and what that next generation will build off. It’s also something you can start on right now, no matter how far out you are from retiring.
Identify and Develop Future Leaders
Identifying the right people on your team to carry on your firm’s mission is one of the most important and challenging steps in the process. There is no magic bullet here; this part will look different for each firm. It’s important to remember that no one will be a replica of you, and a great successor might be very different from you. Our industry is evolving, and the next generation will come from many different career paths, places, and backgrounds and bring different perspectives. The best thing to do is make sure their values align with yours and the company’s, so even though you and your successor may differ, they will be leading your firm forward from a similar place.
Leadership development doesn’t happen overnight. It requires intentional training, mentorship, and opportunities for hands-on experience. Technical competence in financial planning alone will not make a great successor. The next generation of owners must develop leadership skills, business acumen, and the ability to manage client relationships effectively. Create opportunities for younger advisors to take on more responsibility, make strategic decisions, and engage in business development early in their careers.
Some ideas for their development:
- Provide them with resources, and more importantly, time to develop the skills they will need.
- Give some guidance on where they can go to learn more about running an RIA, e.g., books, podcasts, webinars, and even conferences that focus on practice management.
- Cultivate an ownership mindset by encouraging them to think beyond their individual roles and how decisions might impact the broader firm.
- Prepare yourself to step away and cede some control to them. (Yes, this could be tough!) Give them experience of what it will be like to be in the decision-maker seat while you are still there to provide the safety of some guardrails. Start small with a project and build up to larger strategic decisions.
The transition from employee to owner is a significant shift, mentally and professionally. Have patience and empathy. Give them the space to grow and sometimes fail in a supportive environment to help build their confidence and resilience.
Create a Structured Transition Plan
A well-thought-out transition plan will help with reducing uncertainty and ensuring continuity for employees and clients. A structured transition should address key questions such as:
- What is the timeline for ownership transfer?
- How will the financial structure of the transition work, e.g., buy-in terms, financing options?
- What role will the outgoing owner(s) play post-transition?
- How will client relationships be transferred smoothly?
In my experience, having a clear, written transition plan prevents misunderstandings and ensures everyone involved is working from the same playbook. It also provides the next generation with a roadmap for their future career so they can set their expectations.
Communicate Openly with Clients
Clients build trust and relationships with their advisors over time, so a sudden change in leadership can be unsettling if not handled properly. Thoughtful communication with clients is key.
Introduce future owners to clients as often as appropriate. Allow them to take the lead in meetings, provide input on financial plans, mingle at a company-sponsored client event, and establish a rapport with clients long before a transition takes place. This strengthens client confidence and allows for a seamless transfer of trust when the time comes for a leadership change.
Seek Guidance and Learn from Others
You are not alone in this process! Many of your colleagues are facing the same succession planning challenges you are. Seek advice and guidance from those who have gone through or helped others through the process. Whether it’s joining a NAPFA local or MIX group, working with a consultant, or learning from peers, having outside perspectives can help you navigate challenges and avoid common pitfalls.
Final Thoughts
Succession planning isn’t just about your transition to retirement; it’s about ensuring the longevity and success of your firm for years to come. By starting early, developing your future leaders, and creating a structured transition plan, you set up your firm for a smooth and successful transition.
As I reflect on my own journey, I can confidently say succession planning is not just a business strategy; it’s a responsibility. Preparing the next generation of owners is one of the most impactful things we can do for our clients, employees, and the financial planning profession as a whole. It’s time to stop procrastinating and start succession planning!
Christina Traurig, CFP®, MBA is a Principal and Financial Planner at Cornerstone Financial Planning, an independent RIA with offices in Portsmouth, N.H. and Portland, Maine.
image credit: Adobe Stock Images
