Having a great, well-thought-out succession plan for your business shows a lot of care and respect for the people you love and care about. With a proper agreement, the beneficiaries will be your family, your staff, your clients and every supplier from your landlord to the office supply company that you use.

It isn’t tough, but there are many moving parts. You need to think about valuation, funding, operations, regulation and compliance, contracts, and ongoing client relationships. We will focus on the succession side of your wealth management business and not the traditional CPA side. While in theory there are many similar issues, the value of the traditional CPA firm is disconnected from (and far lower than) the value of the wealth management practice, and is frequently dealt with separately.


As CPAs, we are frequently at the epicenter of many of our clients’ significant business decisions. Some are more fun to talk about than others, with succession planning usually not on the list of favorite subjects. It used to really blow me away as I began to work on new cases where the client had had a quality CPA firm in the saddle for a long time, with a dysfunctional or non-existent succession plan. Now I am used to it and assume (with great accuracy) that their CPA simply isn’t devoting the time to make sure that this is well thought out and documented. But what really blows me away is the answer I get when I ask a CPA financial planner about their own succession plan.

The first step of a succession plan must be considered in the context of your key person not being there tomorrow. Harsh, but stuff happens, and we can’t do this after some future event. It needs to be done as if the unthinkable might happen tomorrow. Bear in mind as you go through these exercises that a solution may not exist within your four walls today. We’ll talk more about this later, but it is entirely possible that the components of your succession plan simply do not exist within your existing wealth management practice. That is no reason to avoid the issue, but it is cause for developing relationships outside of your own practice that may help.

Let’s start with the value of your wealth management firm. Rules of thumb regarding x times revenue are beginning to become meaningless. The drivers of the valuation of a wealth management practice are many, including but not limited to factors such as the character of the revenue, the size of the firm in terms of staff and revenues, the number of clients, the average revenue per client, the average age of clients, the average tenure or duration of a client, your relationship with the next generation of your clients, the service model utilized, and the earnings before interest, depreciation, taxes and amortization that your firm generates.

The best way to understand the value of your firm is to hire an independent valuation specialist to prepare the valuation report. This sounds familiar, doesn’t it? How often do you suggest this to a client to have it fall on deaf ears? But for yourself, this could be one of the nest investments that you make this year.

The reason a full valuation report is advised is for the information that is contained within it. A simple estimation of value may get you a number that is close or even acceptable to all parties, but a full report will evaluate and score you in each of the significant valuation metrics. You’ll see firsthand from a valuation professional what you need to do in order to grow the value of your wealth management division — which is priceless, if you ask me.

Funding a succession agreement comes in many forms. There may be funding needed to buy out a deceased shareholder, to replace a key person, or to sustain the firm through a period that may include a slowdown in business development or a loss of key clients. What I ask of you is to take these issues seriously, and role-play the loss of any key person to determine an appropriate amount of funding. That funding can come through life insurance, the cash reserves of the firm or future cash flow. But if you take the easy way out and simply make future cash flow the funding source, forecast the implications of such and ask if that is optimal.


When you’re looking beyond the financial side of a succession plan, you need to make sure that the business is as strong as possible the day after the dreaded event. From an operational perspective, make sure that the day-to-day part of running the business is going to be functional. That means everything from assets you may be overseeing to client services in progress and meetings already on the calendar. Take a close look at how each key person spends their time, and have a backup plan in place.

Regulation and compliance is now a significant part of the succession conversation. Regulators have made it clear that they want firms to include a functional succession plan as a part of their overall business continuity plan. Heretofore, BCPs were typically referenced in terms of significant disruptions from disasters, power loss, computer issues, phone interruptions, etc. But now the regulators have made it clear that the loss of an owner or key client service person should belong in the category of business continuity planning.

Other significant issues regarding regulation and compliance may include the services of a chief compliance officer. If your key person is your CCO, then you most definitely need a backup. That can be problematic from within, in that the newly designated CCO needs licensing and experience to serve in that role. This is another area where a relationship with another firm or a partner is helpful. In fact, in some partnerships you wouldn’t even need to have a CCO. They would provide that service as a part of your standard business relationship.

To the extent that your wealth management firm has a relationship with a broker-dealer for commission-based revenues, note that those revenues may only flow to a licensed individual and not to a firm. In order to protect the revenue flow from the loss of a licensed registered representative, you’d need a few things: You would need a second licensed person within the firm and an agreement on file with the broker-dealer stating that the second licensee is to become the rep of record for any accounts of the deceased, disabled or retired former licensee. Of course, to the extent that this second licensee is not a partner or shareholder, you’d also need a separate employment agreement with that person stating their role and responsibilities with respect to client service and revenue flow.

Some broker-dealer agreements are clear that, should a registered representative pass away without a succession agreement on file, the accounts of the deceased become house accounts of the broker-dealer. Read your agreement and understand what your situation means to your family, partners and clients. I’ve heard some bizarre stories when inquiring about this, and must share what I felt was the most ridiculous. I was meeting a 75-year-old accounting practitioner with a large book of C share mutual fund clients. When I inquired about his succession plan, he had not made any plans. When learning that the broker-dealer firm would own his clients and his revenue stream in the event of his passing, he became curious and called the broker-dealer. What the president of the firm told him was not to worry, they’d allow his (75-year-old) wife to get licensed and then transfer all of the clients back to her so she could sell the business. Wow! Do they really expect clients to wait for months so that a 75-year-old out of the workforce for decades can get licensed merely to sell the business? Unrealistic at best.

Another issue for consideration in the succession of your wealth management business may be agreements and contracts in force with the former key player in your firm. Whether they are leases, bank loans, broker-dealer or RIA agreements and custodial agreements, you need to be certain that any contracts signed by the “deceased” cannot cause a significant business interruption. Gather together all such documents and contracts and understand the implications of a succession problem tomorrow.


In my opinion, the most significant issue for the succession of your wealth management practice is the ongoing client relationships. I could write a book on this topic alone — yet it would be more along the lines of practice management and what great client relationships should be like in the first place.

For starters, articulate your succession plan to clients. Don’t be fooled by their silence on the issue. Just because they haven’t asked about your succession plan doesn’t mean that they’re not thinking about it. In fact, I’ve had two new clients in the past year because they were concerned that their prior advisor was a small practitioner with no apparent succession strategy. And on the other hand, advisors in our firm who have articulated their succession strategy with clients have grown faster and received higher-quality introductions to prospective clients than those who cannot articulate such a plan.

Next, be sure to have a competent staff that interacts with clients regularly. It is a mistake to shield your staff from your clients. Hire well, be proud, and take the mentorship of these other professionals seriously. If your clients feel well-served by your staff today, they are likely to feel well-served by them after you’re gone.

If you’ve got a thin staff, or a largely administrative staff, this is another area where a strong partnership with another firm can help. Your clients love your small, boutique wealth management feel, I’m sure. But being a part of a larger firm with greater resources and the ability to help you with succession and other technical matters may really help.

If you have partners and haven’t solved the succession issue, ask them why not. Our firm, for example, has created a revocable, contingent succession agreement to cover all of the possibilities: death, disability, loss of license(s) or retirement. If you need a partnership for succession or more, get started today. Finding a partner is not as difficult as it would be if you were trying to sell your practice today, but it is a similar evaluation process.