By Allison Reed
It can be exciting to run a solo financial planning practice, but there are some significant downsides to going it alone. What would happen to your practice if you passed away or became disabled? How would your family be affected? And what about your clients?
I don’t want to be overly dramatic, but every advisor is going to die—sooner or later—so it’s not a matter of “if,” but “when.” What plans do you have in place to prepare for that eventuality? If you’re solo practitioner, you don’t have a lot of options.
You’ve probably worked hard to build your practice, but without a formal succession mechanism in place, its value all but disappears when you die or are incapacitated in some way. That can spell disaster for your family, as what should be a significant asset basically goes for naught.
I recently learned the sad tale of a solo advisor stricken with cancer. His children tried to keep the practice afloat while he battled the disease, but they were quickly out of their depth. When it became evident their father wouldn’t be around to pick up the pieces, the result was a “fire sale,” a hastily organized attempt to derive some value out of the practice.
In addition to leaving your family “high and dry,” you also fail your clients when you don’t have a plan in place to seamlessly maintain their service. If you’ve made no plans for your practice after your demise, your clients must scramble to find new advisors. Even if you’ve entered into a formal or informal transition strategy with a fellow advisor, that person will be a stranger to your clients, potentially leaving them uncomfortable as well as facing a mountain of paperwork.
What’s the alternative to having your business be destroyed because you don’t have a safety net in place to protect you, your family and your clients? Our advisors have chosen to join a firm that includes succession planning as part of every employment agreement.
They gain peace of mind by knowing that in the event they die or can no longer carry out their duties, we will buy their practice at its full value, providing their family with financial security. Their clients benefit greatly as well, since there won’t be any disruption to the service they receive; no paperwork or distribution changes are required—and they won’t be dealing with a stranger.
No one likes to think about their own mortality, but when you’re in the business of helping guide clients to the financial futures they desire, you owe it to them to have a formal succession plan in place so you don’t leave them hanging. Your family also deserves that peace of mind—and succession plans are increasingly becoming an expectation in the industry, something we applaud.
Other articles filed under LA/OC CFP Team Posts
April 7, 2021 - If your parents are over age 75, it might be time for you to provide some assistance to them. Yes, this is tough. Nothing in life has properly prepared you to address the issue of what kind of help you...
March 29, 2021 - A recent episode of The John Chapman Show featured a conversation with fellow WorthPointe advisor Matt Addington, CFP® about backdoor Roth conversions — a follow up to a previous episode where the pair talked about Roth conversions in general. During...
March 15, 2021 - WorthPointe advisor John Chapman talked with Senior Care Authority founder Frank Samson about finding the best option for senior housing and care on the latest episode of The John Chapman Show. In addition to stressing the importance of being educated...
February 18, 2021 - No one likes to talk about their own death, so estate planning is something often put off—or not done at all—with unfortunate consequences. WorthPointe advisor John Chapman talks with estate planning attorney Darlynn Morgan about why it’s so important to...
November 2, 2020 - With the 2020 election just around the corner, many people may be wondering how the stock market might react and if they should be reviewing their investments leading up to November 3. Understanding that, WorthPointe advisor John Chapman dedicated a...
- Independent Advisors: Do You Have Freedom Or Are You Drowning?
- Financial Advisor Magazine’s 2020 RIA Ranking Has WorthPointe at #416 of 715 firms