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Brett Davidson: Serious about succession? Don’t stay too long

The biggest factor behind a successful succession is knowing when to step aside.

If you are serious about creating internal successors within the business you have built up over your career, then there are some important issues to consider.

The biggest of these is your specific plan and timeline. If you have been talking about succession for too long, some of your team might not be taking you as seriously as you would like.

You might be certain you are phasing out and eventually leaving them in charge but they will not be feeling that if firm actions are  supporting your words.

Why is this an issue?

Let me relate a story of one of my old clients in my former financial planning business in Sydney.

Charlie is 55 years old at the time (about 20 years ago) and has just taken over the family business. His dad, who is 75 years of age, has just retired. Dad continues to take a significant wage from the company even though he no longer works there, saddling the business with a major cash drain.

Why advisers should consider getting extra support in their business

In Dad’s patriarchal generation it was completely cool to work until an old age and then hand over the company to number one son. I say it was cool. What I mean is it was socially acceptable; it was never good business.

File image of father teaching son businessWhy? Because number one son was full of energy when he was 30 or 35 years of age. By 55 he is thinking of retiring himself, and certainly does not have the energy and enthusiasm he had 20 years before.

When it is someone else’s business you can see the obvious problem here. Dad could have handed over when he was 55 rather than 75, and mentored number one son to take the business forward to another level.

So let’s talk about you:

  • I am assuming you are committed to internal succession rather than external sale of your business.
  • I get that you created your business and that it is your baby.
  • I know that you love your job and might not feel quite ready to hang up your clogs just yet.

However, if you are serious about succession, then you need to be prepared to modify your role within the business.

You do not have to resign. You do not have to stop dealing with your 30 best client relationships. You can still be there five days per week if you want to. But you can also consciously step aside and take on the chairperson or mentoring role.

How to get adviser remuneration right

You need to give the reins to your new leader or group of leaders. Let them have their go while they are full of beans and new ideas.

The mental shift

The key is getting your head around the fact that mentoring the next generation of leaders, while you stay involved, is a fulfilling role in its own right.

So why not embrace that? Let the new leaders take over and then simply provide wisdom, guidance and council when requested. And it will be requested. These people are not stupid or arrogant. They do not step in thinking they know it all. Quite the opposite.

Most things the new leaders do will be good for the business and may even be things you really struggled with.

In one business I am working with, they have to let some of the smaller clients go. They do not fit what the business has become and certainly do not fit where it is going.  For the existing owner, this is a huge emotional wrench but it needs to be confronted and dealt with. The new leaders are doing it.

Advisers need an action plan to deal with the future

Let the new leaders lead. Let them make mistakes and learn from them just like you did. It is how we get better.

During this process, you might even believe a particular decision will end in failure, only to see it work out brilliantly and take the firm on to a new level or in a new direction. Now you get to learn something too.

Your legacy

The satisfaction for you comes from seeing the business you created, and the leaders you mentored, move onwards and upwards, beyond what you could have done yourself.

You get to tell your clients how proud you are to have created a legacy that will be here beyond your lifetime. This means the clients will not worry about what happens to them after you have moved on.

That is the mark of a quality business person with humility and foresight. It will gain you huge levels of respect and admiration among your clients, your team, your family and the local business community.

What better way to finish your career.

Brett Davidson is founder of FP Advance



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. I agree. For me, selling my business to meet my own retirement needs would be to commoditise my loyal clients (many of whom have been on the journey with me for decades). This would be completely at odds with the mantras I have always held dear and not how I want my legacy to be finally judged. It would also be poor planning on my part not to have other resources to rely on.

    You do need to start planning right from the start so there is a “pot” of money completely separate from the business to live on without becoming an indefinite drain on the business. I’d also advocate planning to be debt free. This means not being too needy/greedy on what you draw out the business for spending and setting aside funds regularly.

    I’d also be getting the younger ones to start their plans early so they start building up their own “pot” for when my grandchildren take over!

    I am fortunate to have my two children as qualified IFA’s and doing a great job of gently pushing me out to grass!

    I would not be doing myself, my husband, my children/the new shareholders or my clients any favours if I stay too involved for too long. That doesn’t mean I can’t in future be invited to & contribute in client meetings. I will attend board meetings & always ready to step in and make the tea if everyone is too busy!

  2. “selling my business…….would be to commoditise my loyal clients…..” Poppycock, one is not the only business owner with the correct ‘mantras’. If no natural successors and one doesn’t sell / merge the business to / with a likeminded individual, one definitely will ‘stay too long’ and let down one’s loyal Clients. One may like to have a Client Review Board and receive great feedback ‘from the horse’s mouth’.

    • No offence intended Ted. My comments were not aimed at criticising any one else’s mantra’s or succession plans. I was just stating that the article was aligned to my own. Just trying to be helpful! I will return to the paddock now…

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