Philip Palaveev
Philip Palaveev
THE BIG PICTURE successor has a combination of the right talents and the right attitudes and relationships . They are highly capable in all the critical areas of client service , growth , leadership , business ownership and character . If you chose to set your succession plans in motion tomorrow , chances are good you would succeed and your firm would continue to prosper for the benefit of its clients , team and owners .
20 To 25 Points
If you scored 20 to 25 points , you should still feel good about your succession plan . You have most of the ingredients , though one area of your successor ’ s career likely needs work . It is very likely that the “ gap ” is in only one area , and it probably does not surprise you when you identify it . That ’ s a challenge you can tackle with mentoring , coaching and development . We will just need a bit more time — perhaps three years or so .
That said , be careful with the blue-shaded questions . These are meant to be deal-breakers . A “ no ” on any of them would warn you about a serious gap you need to address with some urgency . It ’ s very unlikely you had two deal-breakers with a score over 20 , but if you did , scrutinize each “ no ” in the areas where you have a “ Powerball ” number . In particular , watch out for “ no ” answers in the character section . Those can all signal a flawed plan .
15 To 20 Points
If you scored between 15 and 20 points , you can join the rest of us . You have identified capable individuals as your successors , but they need to develop in at least one area — very likely in either business development or leadership strengths ( or both ). Both improve with experience and training , and sometimes it ’ s just attention that ’ s needed . Time fixes a lot of problems . But if there is a skill your possible successor has struggled to develop , it may be time to act with urgency or even change your plan . When they have less than 15 years of experience in the advisory industry , this score is normal and will improve over time . If they have more years than that logged , but still score 15 to 20 points , that may mean you need to add more successors to your plan ( possibly by recruiting ) or to change your plan outright .
If you have a solo practice and your experienced successor scores these numbers , I ’ d wonder about you having picked the wrong person . If you ’ re in a larger firm and you miss the score with a team of experienced successors , you might be better off joining a larger firm or selling to an acquirer known for integrating operations .
In any case , such a score would suggest that you need at least five years before you step down from your position of client service or leadership ( or both ).
Under 15 Points If you scored under 15 , you ’ re quite far away from your succession goals .
This doesn ’ t mean your plan is flawed , but you will need quite a bit of time ( more than five years ) to close the gaps . If you don ’ t have five years , or if your successor has more than 15 years of experience in
the industry , you might be better off seeking a different plan ( selling the practice or firm ) or recruiting a different successor .
Let me explain the logic of the test and the results . First , it is grounded in the belief that your succession plan has to simultaneously address a number of issues : the transition of client responsibilities , your firm ’ s business development , its leadership and its ownership . If any of these four things is not being looked after , the risk is high for both the buyer and seller . The firm could lose clients , or it might stagnate or struggle to motivate its team members or suffer from all three problems at the same time . Importantly , entrepreneurship — the ability to take calculated risks with capital and resources — is vital to your firm too . That ’ s why the question about borrowing money is con- sidered a “ Powerball .” As hikers would put it : “ If you are afraid of the bear , don ’ t go in the forest !” If you are afraid to take risks , you should not be a business owner .
Let ’ s take your successor ’ s character . We hope we don ’ t need to convince you that this is a deal-breaker . If they aren ’ t the kind of person you want working with your best friend , they should not be taking your place .
In larger firms , you can have multiple people developing multiple skills . One person may excel at management and leadership and another at business development ( which is why larger firms offer the advantages of specialization ). But in a small firm , these qualities more often than not have to be found in just one person .
That said , most of the time , most of the professionals in your succession plan should score high in all five areas listed in my chart . In most firms , “ complete players ”— those strong in all areas of the business — are preferred to narrow specialists .
Be careful with the blue-shaded questions . These are meant to be deal-breakers . A “ no ” on any of them would warn you about a serious gap you need to address with some urgency .
Like any test of this kind , mine is an overly simplistic tool that should not be overanalyzed . Please don ’ t fire your successors if the score is 8 , and please don ’ t retire in January if it ’ s 28 .
If the score is 8 , it might be time to ask a lot more questions and worry about the answers .
But if the score is 28 … congratulations ! Chances are you knew it . But it ’ s the job of consultants to borrow your watch and tell you what time it is .
So here it is . It ’ s time to step down . Are you ready for it ?
PHILIP PALAVEEV is the CEO of The Ensemble Practice , the leading business consultants to the financial advisory industry , and founder of the G2 Leadership Institute , a leadership program that trains the next generation of leaders .
DECEMBER 2024 | FINANCIAL ADVISOR MAGAZINE | 21