Succession Planning Tips for Financial Advisors

As a financial advisor, you may dedicate a lot of your time to helping clients create a workable retirement plan. However, it’s also important to consider what your personal exit strategy might look like once you’re ready to retire. Developing a succession plan can ensure a smooth transition, but a 2025 Kestra Holdings industry report indicates that only 6% of advisors nearing retirement have a plan in place. ¹ The best succession planning tips for advisors are actionable and allow you to develop your strategy at a workable pace.

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Succession Planning Tips for Financial Advisors

One of the benefits of having a succession plan is that it puts you in control of what happens to the business you’ve worked so hard to build. For example, you can decide whether to name a successor internally, look outside the business or sell it to an existing firm. Your exit may be decades away, but it’s never too early to begin thinking about succession planning.

With that in mind, here are some practical tips for charting your exit.

Tip 1: Identify Your End Goal

Succession planning is all about starting with an outcome and working backward to create a plan that’s designed to help you reach it. The sooner you begin thinking about your end goals, the more time you have to plan and adjust along the way if necessary.

Your overarching goal may be to pass the business on. But there are different versions of what that might look like. Handing the business over to your children might seem like an obvious choice. But if they’re not interested in running the firm, you might have to cast the net wider for a successor.

For instance, you may consider selling the business to another advisory firm if you’re unable to find a suitable successor in-house. That would require you to obtain a fair valuation and identify prospective buyers that align with your firm’s mission and values. You’d also have to weigh the impact on your clients and what a merger might mean for them.

It’s important to consider your personal timeline for stepping away from the business when establishing your succession planning goals. Kestra found that 76% of advisors who are within 10 years of retirement have not mapped out a timeline for transitioning client relationships. The longer your runway, the more time you have to select and train a successor, get your team on board and acclimate your clients to the idea.

Tip 2: Estimate What the Business Is Worth

If your goal is to sell the business, it’s helpful to have an accurate valuation so you know how to price it. You can make a simple estimation of its market value by subtracting all of the business’s liabilities from its assets.

That number can give you a starting point to work with when deciding on an acceptable price for the business. Asking an accountant to review your business’s finances can give you a more accurate valuation. You may take the additional step of getting a professional business appraisal.

When looking at the numbers, it’s important to separate your emotions from the process. While the business may seem priceless to you, an interested buyer is going to focus on the numbers and what kind of return on investment they’re likely to get.

Tip 3: Solidify Your Personal Financial Plan

Selling your advisory business may allow you to walk away with a decent amount of money in hand. However, it’s important to do some planning independently of anything you stand to gain so that you’re not underprepared if you end up selling for less than what you expected.

Some of the most important considerations at this stage include:

• Continuing contributions to your retirement plans
• Obtaining disability insurance or long-term care insurance
• Purchasing a life insurance policy to provide for your loved ones
• Deciding what kind of retirement lifestyle you plan to live
• Drafting an estimated retirement budget

Health insurance is also something to weigh, as Medicare doesn’t kick in until age 65. If you plan to retire or semi-retire before then, you’ll have to decide how you want to pay for healthcare in the gap.

Tip 4: Communicate Your Plans

A succession plan is most effective when everyone in the business knows what to expect. If you’ve created a succession plan, then it’s important to ensure that those who will be impacted are aware of how the transition will be handled.

That includes both employees and clients. Long-time employees may want reassurance that their role in the business will not be diminished or eliminated. Clients, meanwhile, want to hear that they’re going to continue to be in good hands after you leave the business.

The majority of advisors polled by Kestra, 43%, said that ensuring their clients receive the same level of care after the transition is their top priority. Preparing clients for your retirement, not just theirs, is an ongoing process that requires transparent communication, patience and planning. Be prepared to answer questions about the transition and offer reassurance that your clients’ needs will continue to be met.

Tip 5: Get Help

Succession planning isn’t something you do all at once; it’s a process that can take years to execute. If you feel overwhelmed by the idea of developing an exit strategy, it may be beneficial to have an expert guide you through the process.

Talking to a succession planning consultant can help you identify any weak spots or holes in your current plan that may need to be addressed. They can review your plan and look for any obstacles or challenges that you might have missed. Several firms offer succession planning services for advisors, which may be worth exploring if you’d like an outside opinion on your plan.

You may also want to consult with your accountant or tax attorney to discuss any tax implications of selling the business. If you need key person insurance for the business or other types of insurance for yourself, your insurance agent can help you determine which type of policy you need and an appropriate coverage amount.

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Why Do Financial Advisors Need a Succession Plan?

Succession planning is an opportunity to decide what will happen to the business you’ve built once you’re ready to move on. At a minimum, you may want to begin working on your succession plan when you’re 10 years away from your exit.

Roughly two-thirds of financial advisors have a succession plan in place, according to a 2022 SmartAsset poll. Kestra’s findings suggest that the number could be much lower. If you haven’t turned your attention to succession planning yet, you could be exposing your business to unnecessary risk.

It’s helpful to have a succession plan if you:

• Plan to retire and want to ensure that the business will continue
• Want to pass the business on to your heirs
• Are planning to sell and want to make the transition as smooth as possible for your clients and staff
• Would like to plan ahead for unforeseen situations, such as an extended illness or disability that prevents you from running the business in a hands-on way

A financial advisor succession plan is essentially a safety net for you, your team and your clients. You may also consider a separate business continuity plan to handle situations other than succession. For example, if a natural disaster makes it impossible to operate from your business premises temporarily, a continuity plan can ensure that operations continue smoothly in the interim.

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What Should a Financial Advisor Succession Plan Include?

Succession plans are designed to answer specific questions related to different outcomes. As you draft your plan, consider including sections that address each of the following areas.

• Successors: Who will succeed you? If you can’t answer this question yet, think about who on your team would make a good candidate.
• Training schedule: Once you choose a successor, develop a timeline for training them to step into your role. This may be a multi-year process if you operate a larger firm or have a specialized clientele, such as high-net-worth and affluent clients.
• Support staff: Succession plans should identify individuals who are critical to business operations. If you’re hands-on with all aspects of running the business, you might be the main key person. But you may have additional support staff who also play important roles.
• Staff retention: Your succession plan might need to include guidance on which employees or key persons should be retained once you’ve left the business. If those individuals wish to move on because the business is being sold, you may also need to specify a process for recruiting and training the necessary staff to replace them.
• Legal/financial: A thorough succession plan details the legal and financial implications of the owner’s exit. For example, if you’re selling to a junior advisor on your staff, you’d need to include the details of the sale.
• Communication: You’ll eventually need to tell staff and clients that you’re preparing to leave the business. Your plan should detail when those communications should happen and what format they’ll take. Good communication with clients can influence how many of them stick around after you’ve departed.

When drafting your plan, view it through the lens of your successor. Consider what information you would most want to have when taking the lead. And keep your successor in the loop. Scheduling regular meetings can ensure that everyone is on the same page as the plan progresses, and it’s also an opportunity for you to address any questions your successor might have.

Bottom Line

Creating a succession plan can eliminate any questions about what will happen to your business once you’re ready to retire or move on to another venture. The sooner you turn your attention to succession planning, the more time you have to create a plan that yields the most benefit for the business and everyone connected to it.

Tips for Growing Your Financial Advisory Business

• SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
• If you’re interested in advising clients on their own succession plans, you may consider becoming a Certified Exit Planning Advisor (CEPA). This certification, offered by the Exit Planning Institute, is designed for professionals who want to use a holistic approach to help clients create and execute succession plans. You’ll need to complete a training program and pass an exam to obtain this credential.

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