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Succession Planning: Where Do You Want to Be?

Managing a Practice

Whether you’re looking for new partners to take over your practice or considering the M&A route, the planning for that next move should have started yesterday, speakers at an April 4 workshop session at the NAPA 401(k) Summit advised.

The panel discussion featured three industry insiders who have all gone through succession planning successfully: Grant Arends, President, Retirement Services at intellicents; Jania Stout, Senior Vice President at OneDigital; and Kevin Mahoney, Managing Director and Senior Institutional Consultant at Raymond James (seated left to right in photo).

ERISA attorney Thomas Clark, JD, Partner and COO of The Wagner Law Group (at left), participated as the moderator. Clark noted that he works with a lot of retirement plan advisors as part of his practice and, somewhat accidentally, succession planning has come up as a natural part of the conversation. On those conversations, he learned is that it isn’t really an end point in time where a baton is passed, but rather a series of events over a period of time involving both corporate issues and personal ones. 

As part of any good succession plan, he suggested, advisors should be addressing the following issues: 

  • Do you want to continue to work, and for how long?
  • Should the practice stay in its current form or should changes be made, such as growing or merging?
  • Do you sell to someone within the organization or outside of it? 
  • If the practice is independent, should it stay that way or should it become part of a larger organization? 
  • What compensation is involved upfront and is there ongoing salary? 
  • How will technology be addressed? 
  • What about marketing and branding? 
  • What will happen to key employees and other staff? 
  • Are there additional opportunities for business development and cross selling? 

Success Stories

Turning to what helped shape their decision-making process, Mahoney explained that his firm currently has five partners with a good spread between the ages, noting that they built it that way on purpose with an eye on providing a career path for the younger members to own the business, either with them or in place of them. As background, he noted that his firm spent 25 years at Merrill Lynch, but then decided to leave. They initially could not find a home that would fit both wealth management and their retirement business, but after considering various options, found that Raymond James was the best fit for them because they could choose to be independent, employees or a hybrid.  

For Arends, the way they’ve been approaching succession planning within the firm is 100% internally, noting that they are not looking to be acquired, even though that’s currently a big thing within the industry. Flexibility is key to their approach to succession planning. “People ask me all the time, when are you going to retire? The answer is, within one to 20 years—and I’m dead serious about that, meaning I want to have the flexibility to retire in a year if I want to, but I might work another 20 years.”

To help foster the next generation, Arends explained that they have set up a deferred compensation plan, where the next person in line buys a book of business at death, disability or retirement, which he noted has been very successful in transitioning their business. In general, the program gives all of their producers an ownership stake in their book, whether they own any stock in the company or not. 

For Jania Stout and business partner Chad Wilson with Fiduciary Plan Advisors, they were not intending to sell or join another firm at all, prior to the deal with OneDigital. But after going through the process and considering about a dozen firms, Stout noted, about halfway through, they started to see the value. But, she noted, the two biggest things in her mind were that the deal had to be good for their employees and had to add value to their clients. “I thought, if we’re going to do this, we might as well really do it. And it was a great process just to see how everybody is structured and what every firm thinks that makes them special,” Stout observed.  


Asked by Clark what advice they would give, the panelists agree that one of the first things is examine your business and figure out what you want to do 5 to 10 years from now. It’s also vital to set proper expectations, whether bringing on a new office or bringing people into the fold because you don’t want any surprises. 

“Really, before you look at things, you have to understand why you’re doing it—is this a retirement plan? Are you looking to sell your business? You have to think about why you’re doing it and what the end goal is,” Mahoney advised. If you are going to try to turn it into a business, you also should look at what have you built so far that’s useful and what are you willing to throw overboard, he added. One of the biggest mistakes they’re seeing people make is not finding their succession early when they are thinking they want to retire in one to two years from now, Mahoney said.  

In citing the importance of culture, Stout observed that better succession planning is making sure everyone on your team feels good about what they’re contributing and doing. And beyond the decision to join OneDigital and take risk off the table, Stout explains that there remains a succession-planning process to delegate who takes care of clients and to start sharing responsibilities with others on the team. “The biggest advice I'd give is, especially if you’re the leader of the team, you’ve got to start sharing the responsibilities with everyone else. That is your best next step for succession planning. If I got hit by a bus tomorrow, business would go on without really missing a beat.” 

And reemphasizing the importance of getting started, Arends observed that if you are thinking about succession in less than 10 years and you haven’t started, “you’re behind.” He suggests that advisors need to be thinking about their plans—whether that’s selling their book to someone within their firm or selling their practice to somebody else or both of those things. Arends further recommends not being intimidated at hiring people who might be smarter than you to take over the business, noting that it can be key to helping with a successful succession. 

M&A Landscape 

What changes in the M&A landscape do the panelists expect to see in the next two to five years? The panelists voiced some skepticism about where things are going and whether there is enough to capitalize on the investments.  

There’s going to be a lot of pressure on a lot of firms, with the aggregators and private equity, in essence, putting their bets on turning employees and participants into an additional revenue stream, one panelist noted. Another observation was a belief that the connectivity is not currently there, and amid the ongoing fee compression, that becomes a major issue without the ability to monetize the participants and employees. This is where the private wealth advisor is going to be the key to really provide the services necessary for the participant.