Filed Under:Life Insurance, Life Planning Strategies

Get a plan, man

A conversation at Starbucks illuminates the importance of crafting a succession plan. (AP Photo/Elise Amendola)
A conversation at Starbucks illuminates the importance of crafting a succession plan. (AP Photo/Elise Amendola)

I’m sitting in a Starbucks with Allen Duck and David Cunningham, talking about their favorite topic, succession planning. Okay, maybe it’s not their favorite topic, the two British imports might actually prefer talking “real football,” that kind where you don’t use your hands. I can’t be sure, but when it comes to business talk, succession planning dominates the conversation.

Duck and Cunningham are the principals of Fort Collins, Colo.-based Eighty20 Advisors, a consulting firm that helps financial advisory firms change hands. On his laptop computer Duck pulls up a presentation he recently made at an industry event.

The opening slide held some pretty startling statistics:

  • Over 50 percent of financial services business owners and practitioners are over age 50. In fact, the average age is 56.
  • Less than 30 percent of those owners have a “continuity/succession” plan.
  • Less than 15 percent of those have a “meaningful” plan. Duck claims this last number, perhaps the most eye opening, is due to many of the advisors who claim to have a plan, then point to their forehead when asked about it. In other words, their plan is some illusory thing stored away in their mind.

Duck and Cunningham and I drink our Starbucks tea but eat no scones and talk more about this improper planning taking place and the repercussions it could have in the industry. There’s a storm coming, according to Duck.

“When I speak to industry groups,” he says, “I always ask the question, ‘do you know what your business is worth in case you were going to sell?’” Only a few hands go up. Duck emphasizes that he’s not pushing people to sell their firms; instead, he’s preparing them now so they avoid a fire sale at a later date.

The data is out there in the demographics, according to Duck. It’s nothing that would be a shock to anyone in the industry. As I mentioned above, the average age of the independent advisor is nearing 60. Eventually, something will have to take place with their business.

Does it get sold? Is there a succession or exit plan in place? Does the advisor eventually fade away to that place where old advisors go, leaving their 600-plus clients in disarray?

“Creating a succession plan takes time,” says Cunningham. Time and resources that take away from the primary purpose of an advisory firm — advising clients — and, in doing so, making the money that pays the bills.

With succession planning, however, there’s always time, right? Why do today what can be done tomorrow? Tomorrow and tomorrow and tomorrow. Isn’t that the argument or perhaps the conversation that advisors have every single day with clients, “don’t put off planning your future for another day?”

For more from Daniel Williams, see:

Will seniors ever retire? 

The fiscal cliff: Just another good old Western story

6 consumers share what they want from a wealth advisor

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