Many independent financial advisers spend the majority of their professional lives working painstakingly to build up a business they can proudly call their own. It becomes an integral part of them and a portion of their identity as business owners. But what happens when it is time to retire?
IFAs will talk to their clients about succession planning, but so often overlook this themselves. There will come a time when the business will need to be sold to someone else, and that someone else will need a thorough understanding of the business operations.
The earlier a succession plan is put in place, the better. When exactly that might be depends entirely on the circumstance of the individual adviser. However, as a general rule, the blueprints of a plan should be drawn up no later than 10 years before the planned retirement.
Martin Bamford, managing director of Surrey-based financial planners Informed Choice, says, “IFAs are generally pretty bad at planning the succession of their business. They tend to want the best of both worlds; the ability to continue earning money from clients and a large capital sum for selling their business.
“This combined with the fear that their clients will not receive an excellent personal service in the future tends to delay the point of retirement beyond original plans. There is also so much for an IFA to do on a daily basis that finding the time for strategic planning is often a struggle,” he continues.
IFAs are largely reliant on themselves and are the sole bearers of knowledge of the company, clients, inner workings and future plans. Therefore it is crucial that they are the one to educate their successor, for the sake of both the business and their clients.
Another factor that makes succession planning a complicated process is the very personal nature of selling or passing on a business that an IFA built from the ground up. It holds sentimental value that is impossible to impart to anyone else, or to put a price tag on.
The unique needs of the IFA’s clients must also be taken seriously. Money can be a sensitive topic for some and it takes a great deal of trust for a client to divulge the details of their finances to another to help them navigate through their future plans. When IFAs decide to retire or to sell their business, clients can be left feeling vulnerable.
