In last month’s article, we reviewed some key attributes to consider when selecting a potential successor for your firm. This month, we will discuss how to successfully integrate them into your organization. Integration into the following three key areas of the business, position the future successor for the most likely chance for a successful outcome.

• Client Service – Because financial planning is primarily a relationship based business it is a delicate process concluding the relationship no matter how tenured it may be. Since the majority of the succession planning transaction depends on how many first generation clients can be retained once the first generation owner is no longer around, forward thinking firms will be deliberate about the client transition process.

Internal Successor – By this point, the potential successor should know all of the clients. In this case, the positioning is much more about getting the client to see the previous protégé as your equal. Convincing clients to overcome their Recency bias makes this difficult, as they probably have always known the person as the second chair planner. Keep in mind though, if the client implicitly trusts you, they should, in turn, be comfortable with your decision for your successor to take over, especially if they have witnessed the new successor’s growth before their very own eyes.

External successor – Have the new hire meet clients jointly with you for at least a handful of update/review meetings. For some firms, this could be several years and for others, several months. When you think the new hire might be ready to start working with clients as the Lead Planner, have them write a one page brief describing the family, the issues and approach going forward on all the clients they have met with and present to you so there is a level of comfort before succession.

• Business Management – Having command of the client’s situations and expertise in the technical areas to answer their questions is important, but would not be necessary if the firm was mismanaged from a financial and/or strategic planning standpoint. Sound business management is another pertinent aspect that a successor has to get right for things to work as planned. It is a toss-up on who has the advantage. The internal successor has seen the way things run making them more susceptible to groupthink however, they might not be managed as well as it should. On the other hand, a successor from outside the firm will not have as strong of a gravitation to do things the same way they have been done.

Internal – Begin involving your candidate in the financial and strategic planning decisions as early as possible. Educate them on your decision making process and the financial management guidelines. Mentor them as they begin to manage staff. This can be eye opening for the candidate, as they witness first hand just how many decisions have to be made each day to manage a firm successfully. Some firm owners are unwilling to share the financials for fear of retribution once a candidate, or anyone for that matter, realizes the income the owner earns, however if this is a concern, you should reconsider your successor candidate.

External – The hurdle this type of successor candidate faces is garnering acceptance from the existing team. If not communicated properly (early and often), the team members who were passed over will resent and could try to sabotage the new arrival’s transition. It works best when firms are simply straightforward and honest about how they needed to bring someone else in with a specific skill-set to get the firm where it needs to be for a seamless transition. Firm owners who take this approach as well as taking it one step further by stating something like, “…I was too caught up in building the business and did a poor job of developing the existing team members to take over…” goes a long way in reducing contempt for an outsider and keeping morale high.

• Client Development – As previously discussed, firm’s that are established typically do not need a ‘pound the pavement’ type mainly because the founder already did that, but instead someone who can take care of the existing clients at such a high level they refer everyone they know.

Internal– Consider taking your candidate with you on all Strategic Alliance (SAs) and Centers of Influence (COIs) meetings for as many months or years as needed. See what it takes for these referral sources to build up enough trust and to have a small glimpse of the foundational work it took getting started. Again, they should be exposed to your style and methods, but do not expect them to continue it verbatim. They should also be able to provide a game plan on which organizations and/or associations they plan to actively participate in to keep the firm top of mind with prospective clients. For the most part, boards, charities, etc. are saturated with “financial advisors.” Your successor candidate should instead consider a Blue Ocean such as targeting the next generation of entrepreneurs by joining and/or becoming involved in any number of these http://bit.ly/EntrepreneurOrgs organizations. Depending on the tenure at your firm, the right candidate will have attracted some new business from outside activities, increased referrals, or at least an increase in wallet share from existing clients. If there has been little to no activity in this area, they might not be the ideal candidate for a successor.

External – It is possible that this type of candidate might have a set of clients to bring to your firm. While this sounds like a panacea because “it can be a way for them to pay for themselves”, you need to examine if the clients are a good fit for your firm. Moving clients over and integrating clients onto your platform will be laborious, but will eventually pay off. If they are not, be diligent about making special exceptions because “revenue is revenue” and now you have a subset of clients with a different pricing and/or service model that you never intended to have.

As you can see, there are opportunities and challenges when reviewing how to best integrate an internal successor candidate or an external successor candidate, whichever route you choose. Stay tuned for next month on how to groom your successor!