PLANADVISER - January/February 2022 - 16

trends
Succession Planning Marketplace
Advisers have several business strategies to choose from
A 2018 STUDY by the Financial Planning Association (FPA)
found that over 90% of advisers recognize the risks associated
with having no succession plan, yet just 27% had one in
place for when they no longer want to work full time.
That number might have gone up as the coronavirus
pandemic highlighted the importance of having such a plan,
to deal with the unexpected-and as a hot mergers and
acquisitions (M&A) market has opened potentially lucrative
avenues for succession planning.
" Advisers are experiencing generational change, " says
Alicia Goodrow, a partner in legal firm Culhane Meadows,
who focuses on succession planning. " They're often closely
held, and sometimes family-owned, businesses that have
not looked at the road past the retirement of the founder or,
perhaps, the founder's son or daughter. "
Still, many advisers may put off succession planning to
avoid thinking about their own future outside of the firm-
or simply because it is a time-intensive, complicated task.
Nearly half of registered investment advisers (RIAs) say the
biggest challenges when implementing an internal succession
plan are identifying a successor (49%) and agreeing on a
time frame for executing the plan (28%), according to a study
last May by Dimensional Fund Advisors. Challenges exist
when it comes to external succession plans, as well, including
finding a buyer, valuing the firm and preparing it for sale.
In recognition of these challenges, several consultants
offer services aimed specifically at helping plan advisers
create a succession plan that best suits their business.
Investment Consultants
While succession planning a few decades ago might have
required the services of investment bankers, there has been
a rise in investment consultants over the past decade who
specialize in helping advisers with succession planning,
says Catherine Williams, vice president and head of practice
management at Dimensional Fund Advisers.
Those consultants can help plan advisers not only with
valuations and finding a successor, but also with making
sure the successor is the right match for the firm and its
clients in terms of business alignment and culture.
" They know how to engage the organization and figure
out the soft stuff, right alongside the harder stuff such as the
numbers, " Williams says.
FP Transitions has been helping advisers through the
process of succession planning for more than 20 years. Most
advisers start working with the firm's consulting team to
determine the best transition scenario for them, says firm
founder and President David Grau Sr.
Once advisers have settled on a plan and identified a
successor, they move on to analytics and compensation to
16 | planadviser.com January-February 2022 Art by Karlotta Freier
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PLANADVISER - January/February 2022

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