How A $3+ Billion Firm Implemented A Successful Internal Succession Plan

How A $3+ Billion Firm Implemented A Successful Internal Succession Plan
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As a former advisor and someone who spent three decades in the financial services industry, I naturally enjoy talking shop with other financial advisors. Nowadays, as a practice management consultant, I am less keen on the Sharpe ratio, sequence of returns, gifting strategy and the like, and more engrossed in the intricacies, joys and challenges of running an advisory firm.

Succession Plan

Recently, I sat down for coffee with the CEO of a firm with well over $3 billion of assets under management to, you guessed it, talk shop. When you picture a CEO of a firm that size, what do you imagine? A seasoned industry veteran in his (yes, they are usually male) mid- to late-60s with a big personality? Me, too.

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But not this CEO.

He is a 40-something, second-generation owner-executive of the firm. In fact, the two founders of the firm are no longer in the picture. They have retired.

I was intrigued and asked him if he would be willing to share with me how they managed to pull off a successful internal succession plan – and continue to thrive and find success as a preeminent wealth management firm in the Seattle area. Fortunately, he graciously accepted my invitation and agreed to meet with me for coffee.

In his view, there were three things that the two founders did right that led to a successful internal succession.

  1. Verbalizing their intent to build an enduring business
  2. Relinquishing client relationships early
  3. Having people around to hold them accountable

Verbalizing the intent to build an enduring business

From early on, the founders made sure that everyone – clients and employees alike – knew of their intention to build an enduring advisory business. They weren’t going to leave the firm’s future to chance or go about it in a haphazard manner. From the get-go, they were committed to internal succession. They were not entertaining several succession options, or interested in keeping their options open. Clearly, there is power in articulating and committing to one’s intent, building a business around it and letting your team know that a successor will be chosen from among them.

Relinquishing client relationships early

The founders didn’t only verbalize their succession plan, they enacted it with immaculate precision. As soon as it was practical to do so, they made a transition from client-advisory roles to executive roles. They gradually assigned their clients to other advisors. They did this so that client loyalty would be to the firm, not to the founders. They wanted to mitigate business risk by ensuring that client stickiness wasn’t up to the founders. To enable such transition, they were not afraid to hire people who were smarter than they were or hand over client relationships to these new hires.

By Hoon Kang, read the full article here.

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