An effective succession plan is one that looks at more than the final price tag of the business. Other important issues, such as your retirement plans and the suitability of your successor, also come into play.
Sometimes, however, advisors looking to sell their businesses make the mistake of focusing on the price instead of the overall transition.
“Price is only one factor,” says Sandra Foster, president of Headspring Consulting Inc. in Toronto. “It’s not everything.”
In the first part of this series, we offered four tips on how to get started once you have decided to sell your business and retire. What follows is the next steps you should take. While selling a book of financial advisory business is a long and detailed process with many variables, the following will give you an idea of the basic stages:
1. Inform your team
Give team members a heads-up that you are planning on selling your business.
“People are not fools,” Foster says. Your team members will know that any decisions you make for the business will affect them directly. Furthermore, she says, if you are approaching retirement age, they are probably wondering what you have planned.
In most situations, team members should receive six months’ to a year’s notice of your plans to sell, says April-Lynn Levitt, a coach with the Personal Coach in Calgary.
2. Begin the search
If you are within three to five years of leaving the industry, it is time to start looking for a successor.
Talk to everyone you know — from wholesalers to other advisors — to let them know you are planning to sell your book, Levitt says. Wholesalers often hear of advisors looking to buy businesses. Also, conversations with other advisors at industry events may provide leads.
As well, Levitt adds, your dealer might have a program in place that helps advisors connect with prospective successors.
3. Put it in writing
When you’ve chosen a successor, put the transition plan in writing. Your next steps are a matter of putting that plan into action.
For example, you might arrange to have a business valuator assess your business. You may also have to contact your lawyer and accountant to document the transition plan.
4. Inform your clients
Once you and your successor have committed to the transition, it’s time to let clients know about your decision and introduce them to the new advisor.
Generally, Levitt says, you should inform clients a couple of months in advance of your plans to sell the business and retire. Your departure should not be too abrupt. Inform clients that you will be available to answer any questions during the transition period.
If you have selected an appropriate successor and planned the transition well, your clients should notice little change in the way their accounts are managed.
This is the second in a two-part series on selling a book of business.