Succession planning in a family advice business

While there has been a very welcome influx of young, qualified individuals into the financial advice profession in recent years, a significant proportion of successful advice businesses continue to be led by older, experienced advisers who built up these businesses from scratch. A high number of these businesses have seen children of the owner join the business, build up their experience, gain relevant and valuable qualifications and help bring the business to a higher level. This is a follow-on piece to last month’s article about structures in family advice businesses.

And the time then comes when the business owner wants to step back, take life a bit easier and start enjoying the fruits of their many years of toil. They also want to pass the business to their children as seamlessly as possible, a situation that we have seen played out many times in Ireland. With a consistent stream of advice businesses undertaking a succession process, there are a number of lessons that can be learned from previous successions that delivered on all of the intentions, and from those that didn’t.


Planning needs to start many years in advance

Succession planning is definitely a carefully planned process as opposed to a transaction event. The most successful successions are those that are planned from many years out – there are a lot of elements to get right! Careful thought needs to be given to the timing of the succession, the terms and basis of the transaction, the tax opportunities that can be leveraged, how the transaction will be funded, the ongoing role (if any) of the parent who established the business, the future direction of the business and the roles of the various children who will be taking the business forward.

This all takes well-executed planning. A poorly planned succession process will be quite unsettling and will likely introduce tension and sometimes fractured relationships among the family members.


Be open and inclusive in the planning

While the business owner often started and built the business pretty much on their own, succession planning is not something to be carried out unilaterally.  A seamless transition and the future prospects of the business will be enhanced by involving the family from the get-go. If the children (future owners) of the business are involved in the planning, they will be more engaged and committed to the process.


Don’t paint yourself into corners

Another advantage of the business owner not planning the succession alone, is that they can avoid making decisions that ultimately don’t fit with the ambitions of the children and that become difficult to row back from. Involving the children in the planning may uncover some unexpected surprises – maybe the expected future leader of the business doesn’t want that role at all, instead they want to have a strategic voice but not be the leader of the business.

The children as a group may have a different future vision to the current owner – their parent. Maybe the new owners see a future as a specialist financial planning business as opposed to a more transactional business. While the latter may have been the preference and right course for the business today, the new owners may see a different future.


Get external help

Surprisingly often the downfall of a succession plan is the family believing that they know what they want and can sort it all out themselves. This may very well be the case, but it can fall down in two areas.

First of all, external oversight brings a new dimension and often identifies additional opportunities and sometimes issues with the chosen plan. Family members can become so immersed in the whole process that they end up not seeing the wood for the trees. External people bring additional rigour and valuable challenging of the plan, which otherwise may be missing. This can happen quite easily in a family scenario where everyone is on their best behaviour, treading cautiously around the whole succession and not wanting to cause offence. The second area where external oversight can help is in drawing out the thoughts, goals and contributions of the quieter or more reserved members of the family. An external can make sure that every voice is heard in the process.


Don’t forget about non-family staff

Don’t forget about non-family members of staff throughout the process. They can feel very side-lined if the whole focus of the business is on the succession process. It is really important to keep them informed and motivated throughout the process, as their contribution and commitment to the business is needed before, during and after the succession happens.


An effective succession within a family business is a momentous milestone in a family’s life. Give yourself every chance of this happening smoothly.



Can men multitask?

Did that get your attention? Not being a member of the fairer sex, I’m sometimes accused at home of taking too long to get things done or only doing one thing at a time. However this piece is definitely not a man v woman piece, instead I hope it reminds you of the ability and incredible value of financial planners who simultaneously carry out a wide variety of roles.

I know from conversations that you don’t miss those days of spending most of your time only thinking about product choices and charging structures. You’re also happy to no longer spend your time worrying if another broker or direct salesman is going to undercut you. You don’t miss living or dying by the vagaries of the stock market – if the fund you suggested went well, you were a hero! When it didn’t, it was always your fault….

As 2023 draws near, the role of the financial adviser has changed enormously over the last decade or so. Helping clients select products is only one small part of what you do. It’s worth remembering all of the areas in which you add value to your clients.


Dream Coach

Financial planners today don’t start new client relationships with conversations about money. Instead you spend very valuable time, really getting to know clients. In fact you go much deeper than this, you actually help your clients to get to know themselves better than they did before.

Good financial plans are based on the goals, aspirations and ambitions of the client. However, very often the client has never properly thought about these! So the first role of the financial planner today is to help clients actually identify their goals and dreams for the future and to build a crystal clear picture of them. Now they have a real destination to aim for.


Lifestyle Enabler

It’s all well and good having lofty dreams and ambitions, an equally important question is how achievable they are, and what price needs to be paid to attain them. This is critical work carried out by excellent financial planners today. Using future cashflow software, you are grounding client dreams in the reality of life and helping your clients to live their life on their terms. You’re helping clients make important choices between living life only in the moment today, or choosing their lifestyle for all of their life based on their financial wherewithal.


Behaviour Coach

And then you stop clients blowing up their plans! You are the voice of reason, the calming influence in volatile times, the expert guide keeping a long-term perspective. We all read professional articles every day of how poor decision making by clients does far more damage to financial plans than the performance of financial assets.

Humans have a nasty habit of doing the wrong thing at the wrong time. In your world, this translates to them selling assets when they are cheap and buying them when they are expensive. In general, people get their market timing all wrong. We hear it all the time – the key is time in the market, not market timing. You are the voice of reason, gently but firmly ensuring your clients stay invested.


Family Finance Guide

This in itself includes many roles. Good financial planners make an enormous difference to families managing their day-to-day finances. Good advice around family budgeting can yield enormous results over the long-term as clients actively manage their expenses and stop wasting money. You also play a marriage counselor role – helping to get couples on the same page about their finances through providing clarity of their financial situation and helping them make the right decisions together. When left to their own devices, money can be a constant cause of strain and arguments in a marriage… The advice that you give to clients about best banking and credit practices is invaluable too.


Financial planner

However the real value that you add is that you lead from the front. You’re the hub around which the client’s financial life revolves. You’re the person who pulls all the strands together. Clients hugely value having an expert in their corner who will guide them in a very complex area of their lives – helping them manage all of their financial challenges and also pointing them to other professionals (solicitors, tax consultants, accountants) when needed.  Never under-estimate how important it is for clients to feel that someone has their back, or even that they have an expert to go to for an insightful second opinion.


Oh and yes, you guide your clients to find the very best financial products to help them achieve all of their goals and dreams in life. This is very important too, but unlike the days of old, this is only one small element of the enormous value you bring in transforming the lives of clients today.

What questions are you most often asked?

Financial planning is a fairly simple concept. There, I’ve said it! It is at least in the eyes of clients, who consider it broadly as sorting out their money stuff. Of course, effective financial planning is anything but simple. It takes a lot of expertise, talent and a really good process to transform the financial lives of your clients.

I came across a report in FT Money who carried out a piece of research among 300 UK clients of financial advisers, with the aim of uncovering their most common questions and the solutions that advisers are offering. It is important to point out that this research was carried out before the current inflationary cycle and all of the turmoil in Westminster! The survey results were quite insightful though, and would likely be relatively similar if carried out in Ireland.

For a start, the top 10 issues that clients want to discuss with their advisers are in the following areas,

  • Retirement/pension planning
  • Tax planning
  • Brexit/political uncertainty
  • Inheritance tax
  • Future financial planning
  • Investment returns/dividends
  • Portfolio review/diversification
  • Global politics/likelihood of market crash
  • Pension drawdown
  • Pension transfer

Maybe no great surprises in the above? It is interesting though that there is nothing directly relating to protection of wealth in there – does financial security fade into the background during times of economic growth? Maybe this would feature more if the research were carried out today…

However, there were four questions that featured frequently in the concerns of clients – do they reflect the conversations that you are having with your clients?


Can I afford to retire?

This was the number one question that FT readers wanted to discuss with an adviser, with more than 20 per cent of respondents naming retirement and pension planning as their top concern. With state pensions providing only basic subsistence support to people, clients are rightly focused on how they will live when their income earning days are behind them. Retirement planning is a critical element of financial planning today through both the accumulation and decumulation phases of life. No surprises here!


How can I pay less tax?

Tax planning was cited by over 17 per cent of readers as a topic they wanted to discuss with a financial adviser. Many financial planners today are expert in tax matters and indeed many of you have additional taxation specific qualifications. This all makes a huge amount of sense as tax is a significant drag on wealth accumulation and good tax advice has a huge impact. Being a personal tax expert is a necessary requirement for advisers today.

This is an area of potential improvement for some advisers. Do you shy away from giving tax advice and guide your clients towards an accountant or tax adviser? Is this always the right approach? Can you really give expert financial planning advice without being a personal tax expert? I’m not so sure…


How can I reduce the impact of inheritance tax?

In addition to general concerns about tax, inheritance tax (IHT) was also a key, specific concern for readers. Although only 5 per cent of estates nationally (in UK) pay the tax, many readers nevertheless fear the impact of IHT — and need an adviser’s help to understand the system.

Of course you are all aware of how penal the Irish IHT system is, with thresholds slashed since the economic crash and IHT rates increased. When you layer increased wealth over the last decade and the recovery of property values, IHT can take a big chunk out of estates. There are ways of reducing these tax bills – you play a really valuable role in helping your clients to take advantage of them.


How will Brexit impact my finances?

Obviously this topic is not going to be of such concern to Irish clients. What it does demonstrate though is that clients rightly worry about significant external events beyond their control. One of the most important roles for you as a financial planner is to reassure clients and to keep them focused on the plan. You are all aware that irrational behaviour by investors is often the single biggest drag on growing wealth. You are the voice of reason, helping clients to keep a long-term perspective.


While these may be the most common questions that clients ask, one important point comes to the surface. The questions that clients have are about themselves and their money, not about the products that they hold. This further confirms the value that you add is as an expert financial guide… and not as someone who chooses the best products and times the markets.

Are you ready to answer the big questions of your clients?

How’s that winning team of yours?

So here we are again at this stage in the market cycle… Even though the economic picture is somewhat cloudy, activity remains high in most advice firms, income is holding up and one of the biggest challenges for many firms is beefing up their advice teams. Those who are recruiting are looking to pick up experienced advisers from other firms, which in turn is creating a retention challenge in these other firms.

So what can (and are) advice firms do today to keep their best people?


Recognise your best people

Might seem a bit obvious, but some business owners are afraid that they’ll rock the boat if they recognise their best people. So they say nothing and hope the winners won’t leave, which unfortunately they are likely to do if they don’t feel valued.

Yes you might have to back up this recognition with tangible benefits, but at least this is keeping you in control of keeping your best people. It also sends a clear message out to the weaker members of your team of your expectations and that you are monitoring their performance. This may make them uncomfortable and indeed these weaker team members could possible leave. This might not be what you’re looking for, but it’s a lot better than losing your best people.


Support your best people

The temptation of business owners and sales managers is to spend a disproportionate amount of time with their weaker team members; coaching them, monitoring them and trying to lift their performance. While at the same time assuming their best people are “grand” and will just continue to get on with doing a great job. A dangerous assumption.

Spend time with your best people too. While you may not be able to improve their performance by the same amount as you can for the weaker members of your team, they will appreciate all of your efforts to help them grow, even by small amounts.  And small improvements by successful people will make a big difference to your revenue numbers.


Challenge your best people

Again many managers will look for ways to challenge their weaker team members, driving them to better performance by “turning the screw”, doggedly seeking higher levels of performance from them. The level that you do this depends on the individual’s personality and the level of under-performance.

However also look for ways to challenge your best people. This should be done in a very positive way, finding ways to enthuse them, to drive them on. You might ask them to manage some difficult clients, open up new lines of business or new target markets or to take on some projects in addition to their normal responsibilities, all the while recognising these additional efforts in a fair and equitable way.


Improve your best people

Yes, you have to be prepared to pay your best people more. But money alone is not the answer. As someone else can always offer your star performers more money. So look for ways to improve them and to help them in their careers. Maybe you could look to pay for them to do more study and to help then in terms of the time required to study to become a CFP? Or if they are not interested in doing more study, maybe they would benefit from and really value time with an external mentor, funded by you? Maybe you can give them greater levels of flexibility in where and how they work? Your best people will recognise your efforts to improve them as people, and at the same time hopefully you will gain from even better performance from them.


Provide a clear career path for your best people

At the end of the day this is the most important factor in trying to keep your best people. It is also the hardest for business owners to deliver as there may be a really significant price to be paid. Your best people will inevitably want to enjoy a greater share of the rewards of the business. And this means ownership of the business, either yours or their own. So if you want to hang on to your best people who may be delivering a significant share of the profits of your business, you need to ask yourself if you are willing to take them as a partner in your business? Because this may be required to keep them into the future. Let them go and watch your firm suffer, or give them some share in the business and grow it together – the choice is yours.

Apps that I’m using more and more

Every summer I give one of these articles over to the subject of apps that I use regularly. This year I’ve steered clear of any financial apps and have focused on apps (desktop and/or phone) that make my working life easier. I’m finding that the more I use them, the more uses I find for them.


App 1: Ayoa

For any of you that I’ve been fortunate to develop strategies and plans with, you’ll have seen this one in action. Ayoa is the replacement for iMindmap, which was the business established by the king of mindmaps, Tony Buzan. I use this all the time when brainstorming, whether on my own or with clients as part of the planning process. Because of the highly visual nature of them, mindmaps are far more effective to capture ideas than using a flipchart, as you can easily edit items, move them around, expand ideas or simply lose the weak ones. You then also have a digital record of the work which can be shared with others or can be exported into other programmes for further use. I’d struggle to cope without this one!


App 2: Canva

While I don’t use this app every day, it is really handy from time to time. It is effectively a DIY design tool. While it will never replace the skills of a good graphic designer, it is very useful for those simple design jobs where you just want to create or manipulate a nice image for use maybe in a social media post. It’s definitely one worth checking out.


App 3: Notes (by Apple)

For everyone with an iPhone, this is an app that is automatically installed on your phone. It sat unused on mine for many years until a few years ago when I used it to capture a list of things I needed to bring on a holiday. Then I started using it for a number of different things outside of work. However in the last year or two, I’ve started using it a lot for just capturing different thoughts about my business in general or about specific projects that I’m working on.

I’m a bit of an Apple fan – all my devices (phone / tablet / laptop / desktop) are Apple devices. The beauty of this app is that no matter where I’m working, I’m only a click or two away from the specific note that I want to read or update. The interface is excellent too – it’s so easy to create notes, create lists within notes and set up folders of associated notes etc. I know there are similar apps available from Google and others – this is the one that works best for me.


App 4: Feedly

An old favourite that I know some of you now use. Feedly is an app that I use all of the time in seeking out useful content from the web to share, and indeed for content ideas to write about. It enables me to track blogs / news feeds that provide content I don’t want to miss. Rather than receiving an email every time there’s a new blog post or news article,  instead the new content is sent to Feedly which gathers all of these articles in one place. It is like a magazine rack for online articles, waiting for me to go through them.

I can then flick down through hundreds of articles in minutes, reading only the headlines, dipping into an introduction or indeed the full article if I think it is actually worth reading. And I can mark them all as “Read” very easily as I go along, ensuring those particular articles don’t appear again. I’ve categorised the different feeds into groups, which further speeds up the process too. The benefit of Feedly is the time it saves me in getting through huge numbers of articles.


App 5: Pocket

And then there’s Pocket, which I see as my sister App to Feedly – another old favourite. This is my scrapbook of articles that I’ve “cut out” and saved for later. As I see articles of interest on the web or that come through to Feedly, some catch my attention to be read later when I’ve a bit more time on my hands. With 2 clicks, I put them in my Pocket and can also tag the articles for different purposes – it might be to share out later, to rewrite with my perspective, maybe to help me develop a new angle for my proposition etc.

I can then go back into Pocket when I want to carry out an activity and simply click on the article that I’ve saved for that very purpose. It’s all very easy and it means you don’t lose great articles that you’ve read.


App 6: Ring

One for those of you who continue working from home… This is an app linked to the doorbell at the front door of my house. What has this got to do with work you may ask? Well my office is in my back garden and gone are the days of missing couriers, missing bulky post deliveries or having to work inside the house while waiting for a caller. Now when my doorbell rings, it comes through to my phone. There’s a camera, microphone and speaker in the doorbell so I can see who it is and talk to the caller as necessary from my desk. The doorbell itself has no wiring and can be installed quickly and easily yourself – trust me, I’ve no reputation for advanced DIY skills… Even if your office is in the house, it might help you decide when on a Zoom call whether you need to run to answer the front door or not.


I hope there’s an app here for you to make your life a bit easier or more productive.

Building bridges with the next generation – Part 2

This is the second in a two-part article on expanding your client base into the next generation of younger clients, by accessing the children of your clients. In last month’s article we looked at how you might build links with these younger potential clients.  In this second instalment, we’re going to consider some of the specific ways in which you might treat this younger cohort, in order for them to fully engage with you and to become long-term clients.


Tweak your proposition

If your proposition is all about managing assets, this is not going to resonate with these younger clients – because they often don’t have any! However what they do probably have is significant income growth potential and the ability to build an asset pool in the future. If you want your proposition to engage them, it needs to clearly reflect these factors and how you are going to help them grow and protect their wealth with these factors (low assets, high income potential) in mind. It may mean smaller steps than you usually take with clients, but with a significant end goal in sight for you of helping them grow appropriately over the long term, with you there guiding them on their journey.


Lifestyle planning is relevant

Quite often advisors will say that lifestyle financial planning (and cashflow planning in particular) just doesn’t really engage younger clients. I strongly disagree with this… How you position lifestyle financial planning is the key here and also how you charge for it will be an important factor (see the final point below). The reason it is so relevant is that younger people tend to have heads full of future dreams, goals and ambitions, more so than older people where life has become a little more settled and simple. Younger people have no sense though of how achievable their dreams are, or what they need to do to bring them to reality. That’s where your skills as a lifestyle financial planner come in.


Targeted communication is a must

Producing regular and engaging communications for your clients is a significant challenge. However you’ll need to accept that it’s going to become even more of a challenge as you build up a cohort of younger clients. Sending “one size fits all” content to your younger clients that you use to engage your clients in their 50’s and 60’s just won’t wash – your younger clients won’t be able to relate to it.

You will need to alter your communication approach with your younger clients, by developing separate content that connects with them and their specific challenges at their stage in life.  It’s definitely more effort, but worth it in the long run.


Look at the profile of your team

Something that we see time and time again is that most client bases tend to generally reflect the adviser in terms of age and other demographics. Potential clients tend to gravitate to people that they can easily connect with, who appear to be “like them”. This is something you need to carefully consider with younger clients. If you’re 20+ years older than your target younger clients, are they really going to connect with you? Or will they feel more comfortable with a younger adviser who they can easily relate to, and who will be with them over their full financial journey. If you have younger members within your advice team, maybe you should hand all of these younger clients over to them? If not, is it time to go out and hire a younger adviser, if you are really serious about expanding your client base among younger clients?


Consider an alternative pricing model

This is a significant headache for advisers… how to make this segment viable, particularly as asset levels are low or non-existent. Unfortunately the answer here is that you may need to take a bit of a bet here with these clients. A trail commission basis won’t work for you and these clients may well baulk at / not see sufficient value in a standard retainer or fee arrangement. So you may need to review your proposition to a “lite” version at a lower cost, with a view to increasing the services and your fees as the years progress. This is a tough one to get right, but can be achieved with careful planning and execution. The payoff will be down the road.


Building bridges to the next generation is a significant challenge, both in terms of attracting them and then delivering a proposition that engages them. However if you do this well, it will add significant long term value to your business.