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Financial Advisor Crisis: Succession Plans

By Robert R. Boeche II, Esq. and Domanic Glenn of Shustak Reynolds & Partners, P.C. posted on Friday, June 19, 2020.

Robert R. Boeche II

Robert R. Boeche II


Location: San Diego, California
Phone: (619) 696-9500 (Ext. 122)
Direct: (619) 546-5502
Email: [email protected]

Financial advisors (“FA’s”) at registered investment advisory firms (“RIA’s”) are facing yet another challenge atop already shaky markets.  According to the June 2020 DeVoe & Co. Study Report[1] (the “Report”), owners and senior members of RIA's are “approaching a succession crisis.”  The Report notes that while the average RIA owner is in their early 60s and would prefer to pass on their loyal clientele and sell their well-established business internally, nearly 57% of surveyed RIA’s claim that a leadership transition would not only be difficult, but would create a “significant or severe challenge,” for the RIA.  However, it is not too late to begin creating and bolstering a comprehensive succession plan.

Bolster Your Plans and Put Your Clients at Ease

Succession planning is the process, or “road map” of determining how the transfer of a business enterprise will occur following a "succession event" (e.g., upon the death, disability or retirement of a founder or a monetization event).  Proper succession planning allows the surviving or continuing partner(s) to continue to run the business and provides liquidity to the departing partner or his or her estate.  The succession plan itself will vary depending on the FA’s/RIA’s business model and should be customized accordingly.  Specifically, succession plans should cover provisions which include, among other things: “performing due diligence, establishing a valuation for the firm, instructions as to transferring assets (if required), financing options, and/or determining whether additional notice filings/registrations are required.”[2]

Where to Start

For most advisors, their clients and book of business are the result of many years of hard work and dedication, and is typically their family’s greatest single asset.  Planning for an unexpected succession is a vital part of any business and must be in place before the succession event occurs - by which time it is usually too late to put a proper plan into effect.  If you have previously created a plan, it is important to dig up your old succession plan periodically and review the document to spot where it could use updating.  If you’re currently operating without a formalized succession plan in place, it is important to implement a plan that identifies who will oversee servicing client accounts should a succession event occur on a short, intermediate, or long-term/permanent basis.  Shustak, Reynolds & Partners, P.C. can help review your current succession plan, or develop a customized plan, that ensures your business operations continue unabated, and that you’re properly compensated should a "successn event" occur.

Shustak Reynolds & Partners, P.C. focuses its practice on securities and financial services law and complex business disputes. 
We represent many broker-dealers, registered representatives, investment advisors, investors and businesses. 
Partner Robert Boeche can be reached in the firm’s San Diego office at (619) 696-9500. 

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