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6 Tips to Creating a Successful Internal Transition Plan


Planning for your eventual exit from your advisory firm is essential, whether you choose a successor or sell your firm. What you need is a succession plan.

Like estate planning for clients , succession planning is critical for RIA firm owners. Think about it: all working professionals approach retirement more and more each day. As you near retirement, what will happen to both your clients and employees?

Ideally, a succession plan is enacted well ahead of this time and while you’re able to run your business. A succession plan can give you and your clients peace of mind that your firm and its legacy will remain, whatever the future holds.

Why Every Firm Owner Needs a Succession Plan

Taking care of clients extends beyond relationship-building and investment strategies – clients are also affected by how you run your business. Would your clients’ needs fall through the cracks if you were to retire? Would your firm stay open? What would happen to your employees?

If you’re nearing retirement, succession planning is non-negotiable – your clients will want to know what to expect. And even if retirement is far on the horizon, a succession plan can help keep your firm and legacy intact in the event of an emergency. Yet, only 37% of all firms report having an adequate succession plan in place. While there is no federal requirement that advisors have a succession plan in place, a documented plan might be required depending on the state.

A succession plan ensures that your clients can rely on your firm to continue supporting their goals. Likewise, the employees within your firm would have stability through the change.

Internal Succession vs External Succession

There are two main types of succession planning: internal and external.

An external plan involves selling your firm and/or hiring someone to buy in and take over operations. There are some appealing benefits to an external hire – for example, an external buyer can bring fresh ideas and talent to your team.

The downside of external succession is that this new person is likely unfamiliar with both your team and clients and will need more training on internal processes. Overall, an external hire can require more time and energy and involve more unknown variables.

Internal succession consists in promoting a new partner from within the firm. The benefit? You get to handpick your successor and train them for this leadership role for an extended amount of time. Your employees and clients are already familiar with this person and likely have a foundational relationship built.

An internal successor can also create smoother sailing throughout the transition. For firms on positive growth curves, the lack of interruption from an external successor can be appealing.

6 Tips to Creating a Successful Internal Transition Plan

Here are six tips you can use to create an effective internal succession plan for your firm, including identifying and training key members of your team.

1. Start early

Ideally, your succession plan should start long before you actually need it. If you wait until the last minute, you risk making quick decisions or missing important information.

You don’t want your clients to feel as though they’ve been kept out of the loop or aren’t top priority during a transitory time. Additionally, your successor might feel rushed into the position and unprepared to take on the role.

Stay ahead of client questions with proactive planning to create a slow and steady transition.

2. Know your worth

Next, you’ll want to get a business valuation to understand exactly where your firm stands. Is your client base rockstar steady, or has an unnoticed decline happened in recent years?

An expert valuation can also pave the way for decision-making throughout the transition, including how much money and resources you’re willing to invest in the succession process. If you’re caught off guard by the cold, hard numbers or just looking for a little reassurance, don’t hesitate to reach out to experts or industry vets for advice.

3. Identify key players within your firm

A necessary part of internal succession is having members of your team that you trust to carry on your legacy and care for your clients.

Identify those key players and begin conversations with them early. Are they willing to take on the role? Is this person known and trusted by clients throughout your firm? Take time to fully consider what you’d like in your next-gen leader.

4. Provide learning tools and opportunities

After you’ve identified your next-gen leader, you need to provide learning opportunities for them to prepare to take on the role.

Think of what experiences were most helpful for yourself as you started your journey as an RIA owner. What training would be most beneficial to your successor?

Beyond training, it may be a good idea to give your successor more authority within your firm to make decisions or changes so they become comfortable with the more difficult aspects of leading a business before it’s necessary that they do so.

5. Get the next leader involved

Beyond having your nextgen leader shadow your work, there are other people who need to feel comfortable with your chosen successor.

Involving your nextgen leader in business planning decisions, client meetings, and other areas of your business is a way to increase your odds of success. This will help familiarize your other employees and clients with their leadership style, and increase their support.

6. Embrace technology

Lastly, the right technology can make a big impact on your succession planning and implementation.

A consistent and reliable tech suite can increase your firm’s value, while also standardizing the training process for new hires you’ll bring in during this time. While your firm may be making changes, proper tech can ensure a smooth client experience at each step.

Internal succession planning can be an emotionally taxing and long process. By starting the transition early, you’re giving your successor a leg up in leading your firm forward.

Envision a Future with Riskalyze

Riskalyze’s high-tech solutions can be part of the solution to giving your successor the tools they need to succeed when building relationships with clients.

Riskalyze has also made successions and acquisitions easier and more streamlined for all parties involved. Advisor Virginia Harriett, CFP®, AIF®, CRES, harnessed the power of Riskalyze to fortify relationships with 550 new clients from approximately 275 households during an acquisition. Read the full story.

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