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Financial Advice

Is Your Succession Plan Future-Focused?

Here are some best practices for developing the next generation of leadership for your firm.

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How well-suited is your firm to you (and, if applicable, your partners)? The most likely answer is something to the effect of good and getting better every day, which is a good thing.

Now let's ask a slightly different but more important question: How well-suited is your firm to its next generation of clients and leadership?

Here's where the likely answers both diverge and are often less positive. The reasons may vary, but most firms tend to underdevelop their next generation, if they even have one.

Which leads to a third question: If you have a next generation of leadership in-house already, is it being groomed in the mold of your firm and the world of financial advice as it stands today, or is it being developed to address the needs of the next generation of your firm's client families?

Of course, some of you may think that you don't need successors because the merger and acquisition market is so strong right now that you can always find an external solution. While this premise is debatable, what's not up for debate is that finding an organization that will care for your client families as much as you do should be your primary obligation.

And let's acknowledge the reality that, yes, you'll likely be able to find someone to write you a check, but is this really why you've invested so much care in building your firm over the years? To sell it to the highest bidder?

At the same time, one thing you can sure of is that should you sell your firm, the buyers will be basing their decisions on the firm's future prospects, not yesterday's financial advice landscape.

So, let's identify some best practices for developing the next generation of leadership for your firm and, if you already have one, to do so more sustainably.

Intergenerational Sustainability

When you think about how you currently develop your firm's next generation, is your focus primarily on transferring the knowledge and skill that you (and/or your partners) have acquired to this point in your journey, or is it to look out a decade or more in order to prepare your successors to serve clients excellently then, too?

Accordingly, the first best practice is to focus on the future. As Susan J. Ashford, Maxim Sytch, and Lindred L. Greer observed in their recent article on cultivating a growth mindset in our organizations, the goal is actually to develop a "learn it all" (versus a "know it all") organizational culture that reflects this proactive, evolutionary ethos, especially in the development of its people.

One way in which this vision will likely have to be expanded is with a broader and deeper embrace of diversity and inclusion. As research from the CFP Board and others indicates, in order to attract the level and scale of talent required, our industry will need to diversify significantly and quickly. Being on the forefront of this paradigm shift could garner you a great first-mover advantage in developing your next generation.

Future-Focused Strategies

It's time to think more carefully about the career paths that your successors can pursue and identify the developmental resources--both already in-house as well as those that will likely need to be sourced externally--that will be essential to enable their success.

Develop a plan for these roles with associated time frames and productivity goals, areas of expertise and skill sets identified. Imagine how this will differentiate your firm positively in its efforts to attract, develop, and retain its future talent. The research is clear that millennials are most attracted to firms that are committed to their professional development, so you'll be positioning your organization in a powerfully positive way by doing so.

Further, investigate other areas of your firm's culture that will need to evolve to make it more attractive to future colleagues. For example, what are the hallmarks of your firm's culture and how are they perceived by potential candidates and next-generation clients?

Just as you'll have to make your firm attractive to multiple generations of your client families, you'll have to do the same with respect to your firm's future talent. Investment in development (by identifying career paths and access to the necessary resources to pursue them successfully) and evidence of communal engagement are two of numerous ways to create an attractive environment where earlier career professionals will flourish.

After completing this critical work, you'll be ready to focus externally. The key evolution here will be to cast a wider net for future talent to attract a more diverse next generation (in terms of gender, race/ethnicity, age/career stage, and so on). For example, to attract young professionals of color, are you aware that there are dozens of CFP Board-certified financial-planning programs at historically black colleges and universities? Groups like the AAAA Foundation--where I am a board member--can help you tap into this pool of future talent.

A final suggestion about how to help your firm cultivate its next generation: Remember that the goal isn't to perpetuate your firm and its culture as it's presently constituted but to evolve it in ways that will enable it to be sustainable. This means that when seeking future talent, the objective shouldn't be to identify young professionals who fit perfectly into your firm's culture as it is, but to seek those who will help it evolve over time to become truly intergenerationally sustainable.

In other words, you're looking not for "culture fit" but for "culture add"--not for colleagues who remind you of who you were or are (that is, who reflect your firm's culture at present) but ones who will help develop your firm into an attractive option for future generations of your client families as well.

Walter K. Booker is the chief operating officer of MarketCounsel, a business and regulatory consulting firm for registered investment advisors. Prior to joining MarketCounsel, Booker was a senior operating executive in both the institutional and individual investor sectors of the financial-services industry. He is chairman emeritus and a board member of Sponsors for Educational Opportunity and a board member of the AAAA Foundation. The views expressed in this article do not necessarily reflect the views of Morningstar.

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