Succession planning: An essential step in an advisor’s career

This article was generously provided by Lise Benoît, Business Development Manager, Financial Horizons Group, Quebec Region.


Planning for a future in which someone else takes over your business is something that most advisors spend little, if any, time thinking about. However, after working many long years to build a broad client base through the acquisition of blocks of business and organic sales growth, the next logical move for advisors is to ensure they are prepared to sell off their business and for retirement, whether partial, gradual or full. It can be a real challenge, especially while trying to maintain the quality of service that you offer to clients.

In the financial sector, children occasionally work with one or both parents with the understanding that they will eventually take over the business. This can be a beneficial arrangement for all involved. This situation is infrequent however, and instead advisors are developing their own succession plans.


Planning for retirement

Clients are often similar to their advisors in terms of demographic group, falling within ten years of their advisor’s age in either direction. For this reason, it is recommended to begin the succession process around two years before selling to allow for a transition period and for the introduction of the new advisor to clients.


It is also important to retain year-end reports for the last two years and to make them available so that the buyer can be aware of renewals and see any increases or decreases in income. Note that Financial Horizons Group can help with certain aspects, although only in relation to the companies for which you are coded with FHG.


Determining the value of a business

Many factors go into calculating the value of a business, including:

  • Assets under management and active business
  • Quality of the client base
  • Level of diversification
  • Scope of client base (territory covered)
  • Potential for new business over the next several years
  • Quality and value of database and files (compliance)


In short, effective succession planning helps to preserve the value of the seller’s business while also maximizing business development potential for the buyer.


A variety of financing strategies may be adopted to facilitate the sale over the short or long term to suit the buyer’s or seller’s requirements. Some advisors just want to sell everything and retire completely, while others prefer to continue working while also financing the purchase wholly or in part. This generates income for the seller for the duration of the financing period. From a tax perspective, the seller also has the option to spread the capital gain over a five-year period.


The business development consultants at Financial Horizons Group are here to guide you through the process at this crucial stage of your career as an advisor! Please don’t hesitate to contact them for support.