Advisers are often told to start their businesses with the exit in mind – but many don’t. While the logic is clear, often framed in clichés like “if you fail to plan, you plan to fail”, it still feels counterintuitive to think about stepping away from something that’s only just begun.
In the early days, succession planning can seem irrelevant – retirement a distant concept. But time passes quickly, and before advisers know it, retirement may become a more pressing conversation, not least because a spouse or partner raises it first.
So, what does realistic succession planning look like, and why shouldn’t advisers keep pushing it down the to-do list?
Succession starts early
Recent research by IFA network ValidPath found that while 77% of advisers agree succession planning is important, 23% don’t view it as a priority. Just 9% consider it a central part of their business strategy – although this rises to 25% among those intending to retire within five years. Most advisers (57%) believe five years or less is enough time to prepare for their exit.
Before advisers know it, retirement may become a more pressing conversation, not least because a spouse or partner raises it first
But ValidPath chief executive Angus MacNee says early planning gives advisers the best shot at a smooth transition and maximising value.
“It’s important to start planning early,” he says. “That way, you give yourself the best opportunity to have the exit you’ve envisioned – for yourself, your clients, stakeholders and your staff.”
Take something as simple as share structure. “If you haven’t got that sorted and you want to make a change when you’re ready to retire, you could lose access to things like entrepreneurs’ relief or business asset disposal relief,” MacNee adds. “You need at least a couple of years of planning to benefit from those incentives.”
The delay problem
The trouble is, many advisers are too busy running their businesses to think about leaving them. Succession planning often falls victim to the same fate as pension saving or will-writing: a job for tomorrow.
Many firms are built on long-standing client relationships, making it emotionally hard to step away
“I think most people are just consumed with the day-to-day,” says Chris Ball, chief executive of Hoxton Wealth. “Sometimes financial professionals are the worst at managing their own finances, because they spend all their time doing it for others.”
The nature of advice work doesn’t help. Many firms are built on long-standing client relationships that often turn into real friendships – making it emotionally hard to step away.
“The business model used by many advisers can also act as a disincentive to retire,” says Kevin Paget, director and head of deal advisory at chartered accountants Mercer & Hole. “They continue to earn a percentage from historic investments. Timing is often personal, but it can be affected by health or wider market factors.”
Identity crisis
For some advisers, retirement is not just a financial issue – it’s a personal one.
“It can be a touchy subject,” says Sara Daw, co-founder of the CFO Centre and author of Strategy and Leadership as Service. “We’re facing our own identity crisis and even our own mortality.”
Daw believes many people tie their identity to what they do, not who they are – and stepping away from the business can be an existential shift.
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“I see a lot of business owners who are terrified of retirement,” she says. “They need to do some inner work to plan for a life with purpose after they stop working. And a lot of people just put that off.”
There’s also the concern that talking about succession might unsettle the business. “If you raise it too soon, people may start speculating about who’s going to lead the firm,” Daw adds.
When it’s too late
The risk in all this procrastination is that when advisers are finally ready to retire, the business isn’t ready to be handed over.
“By the time it feels relevant, you haven’t laid the groundwork,” says MacNee. “You’ve missed the chance to make the process easier – or less painful.”
Sometimes an exit is forced by health or personal circumstances. Having a sustainable, profitable business with growth potential makes it far easier to realise a meaningful capital event when the time comes.
“The stronger the business, the better the outcome for the vendor,” MacNee says.
Getting sale-ready
Even with a willing buyer, succession takes preparation. Gavin White, partner in the corporate team at law firm Nelsons, says there’s often a lot of behind-the-scenes work needed to make a sale run smoothly.
If succession planning becomes part of the ongoing discipline of running the business, it gets easier over time
“This includes ensuring accounts are sound, contracts are up to date, compliance is in order and that key agreements are properly documented,” he says. “It helps avoid issues during due diligence and reduces the risk of a price chip, though these things do add costs to the business.”
For many, those costs can be hard to justify in the early stages. But if succession planning becomes part of the ongoing discipline of running the business, it gets easier over time, says White.
MacNee believes advisers hoping to retire within the next five to ten years should begin the process now. “You don’t have to spend all your time on it,” he says. “But it should definitely be on your radar.”
