Succession Planning: Not Just a Defensive TacticSuccession Planning: Not Just a Defensive Tactic

“Anytime you find someone more successful than you are, especially when you're both engaged in the same business—you know they're doing something that you aren’t.” ― Malcolm X

One of the most common traits of successful RIAs is succession planning. Sometimes a robust business continuity plan helps attract new clients while retaining the existing ones. Below is one such real-life example from a partner I’ll call Peter.*

Peter was a high school teacher until he realized that his true passion lay in the financial advisory space. At the age of 32, he quit teaching and launched his own RIA. Given his middle-class upbringing, he did not have any networks to tap into for clients, so he decided to leverage what he did best—educate others. He started developing a “curriculum” and began an aggressive marketing strategy for his financial educational seminars. He tailored them to various client niches—retirees, divorcees, business owners, etc., and gradually his business began to pick up. After two years, he had 100 clients with approximately $120 million in assets under management. He hired an administrative assistant, but otherwise ran a very lean shop. His life was good and he was enjoying what he was doing.

But then his business began to stagnate. Even though his seminar attendance continued to be high, lead conversion to clients was decreasing. He was puzzled. He tried to edit the materials to make them more current; he tried other marketing strategies including digital and even hosted a few client events. Business improved a bit but did not really pick up the pace he was expecting.

That is when he decided to reach out to his existing clients through a survey and get their feedback on what was working and what was not. The response shocked him. Seventy-five percent of his clients said they felt uncomfortable referring prospects to him because of two reasons:

And, even though the majority of his clients had most of their assets with him, he was usually not their only advisor. There was a second advisor in the picture for over 80 percent of his clients.

This was a rude awakening for Peter. All along he had taken it for granted that, given his age, his clients would not be concerned about his continuity plan or his ability to service them. But now that his lack of a continuity plan was hindering his business, he decided to act on the feedback and look to add to his team. Luckily, he found an advisor two years out of college working at the local branch of a national bank. Kevin, the new advisor, was disgruntled with the bank’s wealth management policies and processes, had the requisite training and credentials and, most importantly, a style that complemented Peter’s very well. They quickly built a rapport, and in six months, Peter hired him. Three months after that, Peter began introducing Kevin to his clients and training Kevin on his seminar strategy.

And, the results started to show. Peter and Kevin picked up an additional $50 million in assets in year 4 (compared to only $20 million in year 3). And unsurprisingly, 50 percent of those new clients came through referrals from existing clients. A couple of them even mentioned to Peter that they had been waiting for him to have someone else working with him, so they could feel secure in the continuity of his service.

Five years after launching his RIA, Peter had grown it to $250 million in assets with a competent advisor working alongside him. He felt ready to take on the world and continue growing the business.

What can we all learn from Peter’s experience?

*All names and locations have been changed to protect privacy.

Anita Venkiteswaran is a Vice President at Focus Financial Partners where she is responsible for business development and acquisition activities.