Founders to Successors: Advisor Transitions

Jul 27, 2017


When you read articles on succession planning, they seem to focus on the founder’s point of view – how the founder built the firm and needs to find and groom a successor to transfer the business immediately so the advisor can sail off into the sunset. These articles usually discuss strategies on how to maximize the sale price on the founder’s behalf and leave the successor to figure it out how to pay for it.

The pieces typically don’t discuss the transition itself. They don’t talk about the time, negotiations or real conversations that the founders and successors have. They don’t talk about the human side of the transition. Let’s do that today.

At a recent SEI Advisor Network meeting, I was fortunate enough to moderate two panel discussions featuring founders and successors of advisory firms. One panel featured transitions to family members (father to son, father to daughter); the other featured transitions from senior advisors to junior advisors (both in the same firm, and brought in as successor). The discussions were lively. To my surprise, I saw many of our advisor attendees at both breakouts, as they wanted to hear as many perspectives as possible as they considered their own transitions.

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A slice of the pie

One of the takeaways I heard from one advisor team (and one that was repeated by some of the attendees) was that succession is not necessarily an all-or-nothing discussion. This team started in a large firm together and spun out on their own. They shared office space together for years and as the topic of succession came up (it was started by the successor), a percentage model evolved. Rather than purchasing and then taking over a book, the successor in this firm purchased 10-20% of the other advisor’s book each year at a pre-determined formula.

The advisors’ plan was to transfer 100% of the book over a 7-10 year period, so that one could retire comfortably after that time. The overriding theme in their conversation was fairness. While they talked about timing, pricing, which clients to move, etc., the discussion was based on what would be most fair. They knew they would still have to work together for years, so they wanted to make sure there were no bad feelings. The expression they used was, “If one person cut the pie, the other got to choose the slice.” They bent over backwards to make sure it was mutually beneficial for them (and their clients).

Beaching the practice

Our new paper, The Purposeful Advisory Firm, includes four personas that we created to show as examples. Before the breakouts, many of the attendees identified as one of them. “Mark,” the successful lifestyle advisor, seemed be a hit, as both of our family member transitions clearly identified with the persona. In fact, in his opening remarks, one advisor said, “That guy, Mark? That is me – my plan, up until 2 years ago, was to slowly wind down. I was going to beach the business until my son (who is a CFA in a big firm) said he was interested in coming home and joining me.”

Both advisors agreed that bringing in their children was not originally in the plan – and both successors said the same. The successors had started their careers somewhere else, where they had gotten real-life business experience that they could add to the firm. What was amazing was the renewed energy and passion that both advisors are bringing to the business. The founders were working longer and harder than they had in years and enjoying it more, as they were now building not just for themselves, but for the succession (and success) of their kids.

I think the most challenging discussion, however, was around the culture and services of the firm. Both advisors felt their true value was planning (and thankfully, so did their kids). One of the successors suggested that he realized in his previous firm that it was easy to get caught up in performance numbers and investment jargon as a young advisor, instead of focusing on the long term. In fact, it was one of the reasons he decided to join his father. Over and over, I heard the culture of the firm is why it is successful today; coming in and trying to change the brand would diminish both the brand and the client experience.

Pyramid of dysfunction

Probably one of the more memorable conversations started when one of the successors was asked how she felt, now that her transition was almost over. I don’t remember the exact words she used, but her tone was one of peace. She seemed at peace with the transition; she did her part in making it go as smoothly as possible. But more importantly, she has prepared for the challenge by understanding what could (and would) go wrong.

She discussed reading something on partnerships and described a pyramid. She said the foundation of the pyramid was trust. Without trust, there could be nothing else. But what was interesting was what came next – conflict. She went into the transition with trust, knowing there would be some conflict, as well. And when that happened, they both fell back on trust that each was trying to do their best and what was right. Without trust, the conflict may not have been resolved. With trust, it was.


Rather than hearing from owners who were trying to maximize their valuation, I heard from founders who were very concerned about the culture of their firms. Rather than hearing from successors who wanted change everything, I heard from successors who were passionate about the businesses and were looking to build a generational bridge to the clients and their families.

To me, the lessons were very clear:

  • Make it fair
  • Pay attention to the culture and firm values
  • Know there will be conflict, which can be resolved if there is trust

Making the succession sausage

Next time you read or see something about succession planning, think about what actually goes into it. Not the valuation, but the conversations. What made or is making these transitions successful is treating both the founder and successor with the same care as you would with your clients in the new fiduciary world – putting their best interests first. It ends up being a win/win for both.


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John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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