Preparation for Inheritance | Asset management


Many RIAs fail to pave a path for the next generation of advisors to lead their firms.

Fewer than 40% of RIAs have a succession plan in place, Mary Kate Gulick of FiComm Partners said during a panel discussion held this week at the Wealth Management Edge conference. In part, this is because a proper succession plan takes time and effort that cannot be easily spared when running the day-to-day business.

However, failure to plan has real implications, the panelists said. Moderated by Stella Secunda's Carina Diamond, the panelists, including Gulick, SEIA's Jared Chase and SEIA's Shauna Mace, said the lack of a succession plan hurts not only the next generation of advisers, but also clients and threatens the firm's viability in the future as these senior advisors reduce their efforts, retire or become incapacitated. Mace referred to a recent SEI report which found that 85% of growth at firms is driven by senior counsel.

Different talents

Senior advisors don't have to look for a carbon copy of themselves to take over. Senior advisors tend to have global industry knowledge and business details that the next generation may not be able to replicate. Chase said the firm's founders may have the entrepreneurial spirit, but the next generation brings other things, such as a better grasp of technology.

Given their experience with social media platforms like TikTok and Snapchat, many next-gen advisors are natural marketers, and that's important given the changes in how prospects find a firm. Among consumers under the age of 60, only 29% care about referrals, Gulick said. So future growth will not come from traditional rainmaking techniques; instead, it will be based on digital and social media activities. Senior advisors must change their mindset and give the next general the opportunity and support to do the activities in which they excel.

Practice management

One thing firm leaders can do to help the future viability of the firm is to establish repeatable management practices and business workflows that new advisors can replicate. It also helps educate new advisors on the mechanics of the business, including basics like profit and loss statements. Often, the panelists said, helping new advisors understand the profitability and financial value of the firm opens up conversations about whether or not new advisors want to invest in an equity stake.

COMMUNICATION

Panelists agreed that communication is critical, although it is too often neglected. Senior advisors must be open with clients and employees about what is happening within the company. Start early so it's not a surprise and clients can get used to the idea that there will be a change in leadership, the panelists said. Customers and employees won't be as fearful about what comes next when they have complete information.

Mace also urged senior advisors to develop friendships and share their goals with their clients. Start early and give them time to get to know the individual taking over so it's not a shock to the system when the announcement is made. When customers are part of the process, they will feel more confident.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *