How Early Succession Planning Can Fuel Long-Term Growth

Last Edited by: LPL Financial

Last Updated: May 18, 2023

two caucasian women sitting in front of tablet

When I began this process, I kind of took the point of view—start with the end in mind. What would be an attractive practice for someone to acquire?

- Pat McQuilling, Ashworth Financial Group

Time is an invaluable resource financial professionals must spend wisely. Yet Cerulli estimates that of the 37% of financial professionals expected to retire within the next nine years, one-in-four don’t have a succession plan.1 How can this be the case in a profession built on helping clients prepare for the future?

One explanation could be that succession planning has primarily been considered a retirement strategy. The farther away retirement seems, the easier it is to get caught up in the daily demands of business ownership and put long-term planning on the back burner. 

But there’s much more to succession planning than choosing a successor and passing the baton. Here, we’ll explore how beginning the process early helps financial professionals stay focused and uncover opportunities for growth long before they’re ready to retire. 

Take Stock

Succession planning is the process of identifying crucial positions within your advisory business and developing action plans to fill them. As you review key competencies and the necessary skills to ensure business continuity, you may find that some of your processes and procedures are dated or inefficient. For example, where are there redundancies? Which time-consuming tasks could be automated? Streamlining your procedures and creating repeatable processes now could free up valuable time for you and your staff to devote to your growth initiatives—and make your business more attractive to potential successors down the road.

A thorough look at your organizational chart can also highlight potential candidates for advancement.  Acknowledging your faith in your team and investing in their professional development can be a powerful motivator and retention tool. Planning ahead gives your staff the benefit of time to job shadow, obtain any necessary securities licenses or certifications, and gain valuable experience that will help position them for success in a senior role. And if you do identify a strong internal candidate for your successor, working together over time gives you the opportunity to share your vision and develop a sense of brand loyalty to your mission and client service model.

Maximize the Value of Your Book of Business

Having time on your side enables you to adjust key factors that could increase the value of your business, such as:

  • Business mix: The most valuable revenue sources are those that are consistent, recurring, and scalable, such as fees, trails, 12-b1s, renewals, and financial planning. Diversified revenue sources also often result in a higher valuation.
  • Profitability: What adjustments can you make to increase efficiency and profitability? For example, having a clearly defined service model helps make you more efficient and consistent with delivery, but it will also provide greater confidence to a buyer, which translates to a higher value.
  • Client growth and retention: Successors are drawn to businesses that aren’t only growing but have sustainable growth sources even after you retire. Beginning the planning process early can help make the transition of ownership as smooth as possible for your staff and clients, which can translate to stronger retention rates for both groups.
  • Fiscal responsibility: Make sure budgets are made and followed to keep spending within projected limits and to avoid costs creeping up that don’t generate more revenue in return.

Leverage an Independent Business Valuation

Because owning your business is a deeply personal and fulfilling endeavor, it can be difficult to put an objective price on your life’s work. To avoid over- or under-estimating the value of your business, seeking an independent valuation from a professional is essential. Factors typically included in the calculation include historical growth, profitability, debt capacity, and overall liquidity of the business.

Seeking regular valuations in the years leading up to selling your business can keep you tracking toward your goals, while also uncovering strengths and weaknesses that affect the financial health of your business. For example, what untapped growth opportunities can you explore to raise your market value? What spending patterns or trends do you need to keep an eye on? What business continuity gaps need to be addressed? What strategies can you employ to help position your business for long-term success and sustainability? 

Start with the End in Mind

Advisor Pat McQuilling of Ashworth Financial Group had been focused on succession planning for several years, endeavoring to make his practice as attractive as possible to a potential buyer by changing to an advisory business model and cultivating higher profitability.

“When I began this process, I kind of took the point of view—start with the end in mind. What would be an attractive practice for someone to acquire? And I worked for years to move my practice into that space so I would make a great acquisition for someone. I spent a lot of time and a lot of effort building up to the M&A process. I also came into it knowing I had to be a little flexible, I had to be willing to compromise, because if you get the deal started but don't get it across the goal line, what's the point?” 

It wasn’t long before firms in other states began approaching him about buying his practice, but the logistics and unknowns were daunting. Above all, Pat wanted a successor with the highest levels of integrity and service he and his clients could trust. And he found the right fit at the right time with help from LPL Financial.

No matter how far down the road a transfer of ownership seems, a successful transition starts today. Let LPL Financial’s team of specialists help you start planning ahead with consulting in business valuations, liquidity and succession planning, and mergers and acquisitions

How to Improve Your Financial Advisory Book of Business

Discover 4 strategies to help guide your business investments, manage your expenses, streamline your operations, and increase your book’s value.

Deal Structures for Buying or Selling Your Book of Business

Learn about the 3 most common deal structures to help you buy or sell a practice.

Connect with LPL Financial

Connect in confidence with one of our experienced consultants to learn how LPL can support your move to independence.

1 Cerulli Associates press release, June 13, 2022


The views and opinions expressed by LPL Financial Advisor(s) may not be representative of the views of other Financial Advisors and are not indicative of future performance or success. Neither LPL Financial nor the LPL Financial Advisor can be held responsible for any direct or incidental loss incurred by applying any of the information offered.

For financial professional use only.