This case study is based on the situation of a client of the Covenant Group. Names and details have been changed to preserve privacy.



Like father, like son? Allan had just returned from a four-week vacation in New Zealand and was effusive in his delight at the good time he had enjoyed. He couldn’t wait to tell me all about it, so he scheduled a breakfast meeting his first week back.

“I just can’t get over it,” he said. “After 30 years in the business, I finally took a real holiday. And it was incredible! I have never taken off four weeks in a row, and now I wonder why. I deserve it, after all the hard work I put into building my business.”

“You have earned the right to as much time off as you want,” I agreed. “You are a superstar in every way. You’ve built a great practice, your clients love you, you’ve served on every industry committee imaginable and you are very generous with your time in volunteer work. It’s way past time to reward yourself.”

“Yeah, you’re right,” he said. “But I never before thought I could leave my business for that long.”

“What changed your mind this time?” I asked.

“I have a good team and, of course, my son has come into the business recently. I have a lot of confidence in him,” Allan replied.

“That’s good,” I said. “As I recall, your son was in the landscaping business before but wasn’t happy.”

“That’s right,” he said. “It was too much work for too little reward. I had been trying to persuade him for years to come into the business. In fact, I’d like him to take over completely when I retire.”

“Have you thought about when that might be?” I asked.

“I haven’t been too specific about that. But this vacation got me seriously thinking,” Allan said. “I’d like more time off like that. I don’t know if I will ever fully retire because I love this business so much and it provides a great lifestyle. But I’d certainly like to start slowing down over the next few years.”

“So, your succession plan is to have your son take over the business,” I said. “Have you talked to him about it?”

“I hadn’t really thought of it as a succession plan,” Allan said. “But I guess that’s what it would be. We’ve had brief conversations of a general nature. He knows I’d be thrilled if he did step into my shoes.”

“Those would be very big shoes to fill, Allan,” I said. “Is he ready?”

“He is very bright and a hard worker,” Allan replied. “He did a good job of managing the business while I was away. And the few clients he has of his own seem to like him a lot.”

“I wasn’t questioning his intellect or work ethic,” I said. “My query was more around whether he is emotionally ready. Think about it for a minute: you are going to hand him the reins of a business you spent 30 years building. I also assume you want to be paid in some way so you can continue in retirement to enjoy the lifestyle you have now. In fact, your expenses may even go up if you travel. Is he psychologically ready and willing to take on the responsibility of ensuring the prosperity of the business so you can enjoy your retirement? Does he want to be charged with preserving your legacy at the same time as he builds a future for himself?”

“You make it sound like a bur-den,” Allan said. “I would be giving him a wonderful opportunity. The business is very profitable. Lots of people would jump at this chance.”

“Of course, they would,” I said. “I am not suggesting in any way that having your son as your successor isn’t the best thing that could happen for both of you. However, there are a number of things you’ll have to consider if you want the plan to work as you hope it will.”

“Such as?” he asked.

“Such as how dependent the practice is on you,” I replied. “Your son and team did an admirable job of maintaining the business while you were away. But four weeks of keeping an already strong organization operating is very different from continuing to grow one for the next 25 to 30 years without the person who was the heart and soul of it fully engaged. Did much new business come in while you were away?”

@page_break@“Not really,” Allan said. “But I have a very full calendar over the next month and I know we will catch up.”

“No doubt. But that raises the question: to what extent do people do business with you rather than with your practice? For example, if you were not there all the time, would the referrals and repeat business slow down? Would clients leave if they felt they no longer had access to you personally? Will most people accept your son in your stead?

“If people bought you rather than the business, will they buy him as readily?”

“Couldn’t we work out some sort of transition in which I introduced him to my clients and told them how good he was?” Allan asked.

“My guess,” I said, “is that, based on their respect for you, most clients would be willing, at least, to give him a chance. But that leads to another question: does he have the same enthusiasm for the business you do? One of the key reasons for your success has been your deeply felt belief in the value of what you do. You are almost fanatical about the importance of financial planning and the good it does for people. Does your son share that passion?”

“He is beginning to understand that. We have had a few situations recently in which the value of our work was proven — people retiring as planned, an education funded and, unfortunately, a death claim. But even that was a powerful lesson on the impact of a properly designed estate plan.”

“One advantage your son does have,” I noted, “is seeing the benefits of your work right at the start of his career. Many new advisors have to wait years before their clients actually take advantage of the plans they have put in place. Keeping the faith that what they are doing will pay off for people is sometimes hard for newer advisors.

“Let me take you back, Allan, to the discussions we had a few years ago when we put together your business plan. Early in the process I asked you two questions: how big do you want your business to become and what role do you personally want to play?”

“I remember that conversation,” Allan said, “because it helped me clarify where I wanted to take my practice. We built the entire business plan around that vision.”

“Exactly!” I said. “At that time, retirement wasn’t on your radar screen, so we didn’t give it much attention. Now, it is definitely appropriate to revisit that plan. This time, however, I think your son should be at the table, too. As we ask ourselves the same questions about vision, values, mission, strengths, weaknesses, opportunities and threats, you will gain insight into each other’s thinking. From there, we will be able to create a marketing plan that is less about your personality than the capabilities of the practice.

“Your service strategy will also have to be adjusted to compensate for your reduced presence. You want your clients still to feel they are getting great service even if it isn’t coming from you personally. We’ll create an organizational structure that lets your son do what he does best and leaves the rest to your very capable team. Finally, we’ll want to lay out the financial projections so you’ll have realistic expectations about the rate at which your son can buy you out while creating his own path to wealth.”

“Somehow I knew this was going to cost me more than a breakfast,” Allan said. “But I can’t think of anything more important to spend time and money on.” IE



George Hartman is a coach and facilitator with the Covenant Group in Toronto. He can be reached at george@convenantgroup.com.