Retirement Succession Planning: Myths and Realities
Advisors who avoid succession planning are being held back by common myths.
Here are two typical beliefs that stop Financial Advisors from making their plans.
Succession planning is a task all Financial Advisors know they should do, but somehow it always seems to be delayed in favour of more pressing issues. Part of the problem is that Advisors believe some succession planning myths that stop them from prioritizing this important stage of business planning. Here are the two biggest myths - and the realities - that Financial Advisors face.
Myth #1: You need only one long-term succession plan:
The first myth is the most fundamental gap in succession planning – the myth that you only need one succession plan.
Many business owners, when they start thinking about retiring from active work, believe their succession planning is complete when they've designed a gradual handover of ownership that they’ll put into place at some future time of their choosing. But that’s only half the battle.
Reality #1: You also need a “catastrophic exit plan”
In reality, business owners need two succession plans: the “regular” exit plan that you design and implement slowly, and a “catastrophic exit plan.”
A catastrophic exit plan kicks in to ensure your business can survive if you’re suddenly unable to show up to work due to some tragedy, such as if you are hit by a bus, or have a massive heart attack.
Don't say it won't happen, because it does, and I see it all the time. How will the business carry on? How many clients will run for the door? How will those who stay be served, and by whom? What will the business be worth at that point? And how will ownership be transitioned?
Very few business owners have a written succession plan, and almost nobody has a catastrophic exit plan – but you owe it to your clients to make sure both plans are in place to help ensure your business survives and your clients’ needs are met, even if you’re not around personally to serve them.
Watch my on-demand webinar, where I break down succession into simple steps based on 25 years helping Advisors achieve a profitable exit.
Myth #2: You don’t need to design your retirement
The second myth is the idea that you don’t need to put time and thought into designing your retirement – because retirement is nothing more than just “not working.”
But it’s exactly this absence of planning and designing a purposeful retirement that has business owners working into their 60s, 70s and even later without retiring.
For those “never-retiring” business owners, their business has become more than just a way to make money – it has become their “neat fort” where they go to feel relevant, comfortable and in control. So, retirement never happens, or becomes a vague notion with no plan. The irony is that they spend their career helping clients plan and prepare for retirement, but don’t take their own advice.
Reality #2: A successful retirement is planned and built, just like a successful career
When I work with business owners who are thinking about their second act, or their life once paid work is over, I ask them what’s on their bucket list. What have you always wanted to do? What do you love to do other than business?
If you don’t have a list of things you love to do, or hobbies you enjoy, then you’re missing the other crucial element of your succession plan – and that’s what you, and not just your business, will do once you’re no longer working.
Here are three questions for business owners to contemplate as they’re planning their personal retirement plan:
- How will you stay active, healthy, and relevant?
- How and where can you be helpful?
- What have you always wanted to see, try, or do?
By answering these questions, business owners can start to create some goal-centred reality around their retirement plans. Retirement can then transform from a “vague, someday, maybe” event to an extraordinary future that you design for yourself and those who will share your retirement journey with you.
Donald Cooper is an international management speaker and business coach who got his start sweeping the floors of his family’s business at the age of six, for five cents a day. Today, Donald helps companies rethink and reinvent themselves to create compelling customer value, clarity of purpose and long-term profitability. Learn more about Donald at https://www.donaldcooper.com/
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