Succession is an important consideration for anyone who is serious about building their career and a book of business in financial services. Some companies even offer a structured path to sell your book when it’s time to ride off into the sunset. But selling or buying a book of business, and the years leading up to the transaction are complicated and fraught with risks for both sides. Too many advisors can find themselves falling into the succession trap.

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When I first started in the industry in 2001, like many shiny new advisors, I was approached by various senior financial professionals about working on their book of business. They would tell me how they were going to retire in the next few years and they used the lure of stable revenues and an already built up clientele as bait.

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I fell for it a few times but, sure enough, it was usually a trap. As soon as I’d turn one of the tiny scraps they gave me into a decent sized account, they’d start to backpedal, and never introduce me to their ideal clients. They’d string me along with the ever-moving, fluid retirement date that would never actually materialize.

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Any new advisors that are being sold this same box of prizeless cracker jacks, knows what I’m talking about. Now for those of you on the other side of this deal, just hold on a second before you slam down the laptop infuriated by this one-sided view. I’m not done.

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This is anything but a one-sided situation. I spent a decade building up a financial practice, before moving on to launch what would become CacheFlo and the Certified Cash Flow Specialist (CCS) designation program. I know what it feels like to wrestle with the thought of relinquishing all you’ve worked for.

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For the selling advisor, there is a succession trap too. All of your career, you were told that your book of business would have a high value. Some of you were courted with the promise of an easy succession if you moved from one firm to the next. Maybe you have lost clients to a hot shot new advisor who tried to worm their way in by working on a few cases, and all of a sudden they are trying to poach (I’ve had that happen to me too).

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Perhaps you’ve recruited several new people who never make the cut. Either they flame out, or they get a taste of the money to be made, and choose to take all the training and advice you gave them and go blaze their own trail. Either way, it burns and you can never tell if something is going to work out until it doesn’t.

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Maybe you’ve even got a succession plan nearly to the finish line where the details are just about fully agreed on, and some puppet master from head office decides they’d like to manipulate your deal. They want a different advisor to own your book, so they put the screws to one side and scare your buyer, maiming or seriously hurting you and your reputation in the process.

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So what can you do?

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Of course, having more structure and things in writing from the beginning are important. But this post isn’t about that. It’s about something too many fail to consider that would make the deal sweeter for both sides. 

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There is something every financial professional could be doing from the start to keep everyone motivated, and maximize the value of your client book for both the seller and the buyer. Adding cash flow planning to your practice can weed out any hidden competitors, especially those on the other side of the balance sheet, and increase the revenue per household. Not only will the selling advisor extract more value from the business in the lead up to the transition, but the buyer will be more confident in future revenues. With a cash flow plan, you increase the revenue per household now, and usually predict the revenue growth of that household more clearly in the future. 

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Seller example: You are the selling advisor. You have an existing client who’s had their RRSP with you for 10 years, which is now worth $485,000. You’ve talked to them about insurance but they didn’t purchase any with you to date. You approach them about a cash flow plan and they decide they do want more life from their money. During the cash flow planning process, you confirm their insurance needs and show them how to afford it, refer them to your mortgage contact and discover three additional investment accounts with a total of $350,000 that they move over to you.

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Cash flow planning also creates and supports some much needed procedural structure that can also make your business far more valuable. If your buyer isn’t just buying assets, but is buying a process they can profit from and seamlessly transition your great reputation, that’s value for you both.

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Buyer example: The seller you are working with hasn’t implemented cash flow planning. You’re facing the daunting task of re-papering all clients as you take over. This work is important but tedious, and doesn’t create any new revenue for you. You introduce the idea of cash flow planning to all clients as you re-paper them. Many take you up on the opportunity to get more life from their money. You increase the products per household and generate new revenue from most of the clients as you work your way through the book. You also show these new to you clients instant value in their initial interactions with you.

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Remember that to keep the succession plan from becoming a succession trap, keep clients top of mind, put it in writing first, and leverage cash flow planning to maximize the value today for the seller, and tomorrow for the buyer.

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Watch this clip from one of our webinars. The case study shows how a cash flow plan gave this client the huge insights no other advisor had seen before. This type of approach has a lot more opportunity for both sides, and working with your clients this way can make succession far more successful for all. 

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Ready to test out cash flow planning in your practice? Join our next cohort of the Cash Flow Planning Implementation Program now.

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About CacheFlo

CacheFlo is a financial education company that builds eLearning and tools to help financial professionals and individuals make behaviour-based changes, which allow them to get more life from their money. We want to make it easier for people to predict the impact of their financial choices before they make them.

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About the Certified Cash Flow Specialist (CCS) program

CCS professionals go through enhanced cash flow-based training to develop the skill set to deliver behaviour-based cash flow advice. They start the financial planning process with a cash flow plan to genuinely help their clients get more life from their money.

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About the Cash Flow Planning Implementation Program

The Cash Flow Planning Implementation Program is a 90-day program designed to help financial professionals overcome obstacles and seamlessly integrate cash flow planning into their practice. In the program, you’ll get access to the essential skills, support and tools needed to start seeing revenue from cash flow planning and how it benefits your clients. Learn more about the Cash Flow Planning Implementation Program.