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Why Succession Planning Matters Now More Than Ever: NTSA Summit

“You have to have a succession plan. Dying with your boots on as an advisor leaves your clients in the lurch,” Lincoln Investments' Tom Lakatos said at the beginning of “'Out”'Placements: M&A Succession Planning at its Core," a  session at the 2023 National Tax-Deferred Savings Association (NTSA) Summit in Tampa. “It’s not a badge of honor.”

Noting that financial advisors are good at guiding their clients, he argued they’ve at some point been approached to hire a junior associate but hesitate due to their independent nature.

“It’s why I went independent in the first place; I don’t want to be responsible for someone else,” he added. You might have done so, and it didn’t work out. After all the time and resources spent training and developing that individual, you might have realized they’re lazy or don’t care about your clients as much as you do. I might make you more reluctant to do so again, but you have to be a business owner.”

If he buys a book, he is most concerned about retention. If he must upgrade the technology because the advisor didn’t keep pace with innovation, he’ll pay the seller a lot less.

“So, there are levers that affect the value,” he said.

This panel explained the process of acquiring practices, their overall experience, their client’s, their team, and how to ensure the transition is as efficient as possible.

FP Transitions’ Scott Leak was the first to comment, imploring attendees to ensure a continuity plan is in place. Unlike a succession plan, which is a planned event, continuity plans cover unplanned events.

“It says that in the event of my death, this is what happens,” Leak explained. “You would never have a client not sign a beneficiary form. This is essentially what happens without a contingency plan in place. It’s the advisor’s unsigned beneficiary form for your practice.”  

Harriett Financial Group’s Virginia Harriett has bought another financial firm and also has a son in her business, experiencing both sides of the discussion. Her husband is the president of a fourth-generation family business. Any children must work outside the company for at least three years to develop a work ethic and accountability.

“My son Michael got a job with JP Morgan, which spoke more to my business than my husband’s,” she said. “So, after 2½ years (not quite three), we began the transition and had him come aboard.”

Wise Capital Partners Chris Wise is in business with his father, as is the successor. After spending time away from the firm, he decided to join.

“My father and I are the same; only I’m a better version of him,” high-energy Wise said with trademark enthusiasm. “I’m a better version because he didn’t have himself as such a great mentor.”

Wise recounted a scary situation where both parents contracted Covid, forcing his father into the ICU for five weeks.

“Our succession plan to that point was just a conversation and a handshake,” Wise concluded. “When he got better, we realized we needed to get it done in writing.