What is Succession Planning in Finance? Kavan Choksi Explains
In the ongoing effort to deal with succession planning, it is important for finance professionals and their organizations to not only plan but also execute those plans. It would help if you had both a strategy as well as tactics. This challenge arises in our industry, which deals largely (and often exclusively) with capital markets because many things are happening simultaneously.
According to Kavan Choksi, the average age of top financial advisors in the finance industry is 57. There is no doubt about their expertise. However, clients worry about being left behind by their financial advisors. This happens in the event of the advisor’s retirement or, in rarer cases, tragedy.
Succession planning may not be quite so controversial anymore, with many companies implementing successful leader-for-successor programs. That said, the failure to develop a plan can cause problems within a company. A wealth management firm can face serious consequences if they fail to plan.
Relationships with financial advisors are fiduciary, and their duty is to the client. They put their client’s interests over their own. It’s critical to consider the duty not only during an advisor’s career and contract but throughout the client’s lifetime.
Clients might not ask what happens to their money once their financial advisor retires or passes on, but Kavan Choksi says that it is certain that clients wonder. It is a financial advisor’s responsibility to develop a succession plan. They have to communicate it effectively with all parties concerned. This may include the company they work for if they don’t work independently.
Three factors hinder advisors from forming a succession plan: low valuations, retirement, and desire.
According to Kavan Choksi, when the valuations are low, it would be hard for the seller to justify a sale. Some financial advisors are reluctant to retire as they might not have thought about or prepared for it. Other advisors refuse to sell, desiring to stay engaged as long as they produce top-quality results.
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