As the Baby Boomers continue to age, business continuity and succession planning is on everyone’s radar. Take, for example, the financial industry: the average age of financial advisors in the U.S. exceeds age 50, and less than 12 percent of advisors are under the age of 35. In my observation, among the most successful advisors, the median age is even higher.   

The number of financial advisors who die or are limited by medical issues while still practicing is reaching an epidemic. An estimated 40 percent of today’s advisors will exit by the end of the 2020s, whether the advisors like it or not. Consequentially, this has piqued the industry’s interest for many years.  

Shoemakers fix your own shoes! 

Advisors pride themselves in asking clients the hard questions about business continuity and succession. Consequently, it’s routine to ask clients:  

  • How long do you want to continue working?  
  • What are your thoughts about retirement?  
  • Do you have someone in place who could lead the firm if you either live too long, die too soon, or become disabled?  

For most businesspeople, their single largest asset is their business, and what becomes of their largest asset is a huge deal. They’re asking themselves: 

  • Do I want to sell the business?  
  • Do I want to turn the business over to one or more of my children? If so, who leads the operation? 
  • Do I have an in-house successor, or do I have an agreement to merge with a competitor I trust?  
  • If not, am I simply going to let the company wither away until it falls by the wayside?  

Everyone knows that there’s only one thing certain in life: everybody dies. Making provision for death, disability and retirement is simply not optional. Unless, I guess, you’re a financial advisor! 

While advisors love to discuss business continuity with their customers, as a group they do a horrible job of advising themselves. It’s a classic case of “shoemaker fix your own shoes” where a personal succession plan is apparently on tomorrow’s to-do list.  

Recently I had a discussion with an older colleague. I asked him what would become of his firm if he died, became disabled or decided to retire? While not completely ignoring the first two possibilities, he pounced on the idea of retirement saying, “Retire? I’m having too much fun to retire! Besides, most people who retire are either dead or disabled a year later anyway.” Sadly, my friend represents a significant percentage of advisors today who think they’ll somehow cheat fate and work forever.   

My first mentor told me, “Always do what’s in the best interest of the person sitting in front of you, and your interest will always take care of itself.” While I find most great businesspeople believe in this adage as it applies to the way they treat their customers, it doesn’t necessarily carry over to the way they treat their own businesses.  

Could intentionally building a business to have it continue into perpetuity be in the best interest of the clients, the employees, the successor and the founder? What if, in executing a succession plan, everyone wins?   

The cream rises until it sours 

Back in the 1960s, Laurence Peter, a Canadian sociologist, wrote The Peter Principle. What Dr. Peter’s research found was that just because an employee stands out in one position doesn’t mean he or she will excel at another. In fact, employers frequently elevate people with what Peter famously called a promotion to their “level of incompetence” and suffer the inevitable consequences associated with the decision. They often simply don’t possess the skills needed to succeed in their new position. It’s not so much a case of the person being incompetent, but rather they are not suited for the role.  

One of Peter’s famous statements was, rather than cream rising to the top, “cream rises until it sours.” This can lead to organizations becoming almost entirely filled with people inadequate for the tasks they’re assigned to fulfill. 

Too many good advisors aren’t particularly good businesspeople. Their advisory skills don’t necessarily translate into an ability to lead and build organizations with the proper infrastructure to continue beyond themselves.  Every advisor needs to examine whether he or she is the soured cream keeping the firm from being able to thrive for the long-term.  

The Goldilocks dilemma  

Most of us are familiar with the tale of Goldilocks and the Three Bears. When Goldilocks eats from three bowls of porridge, one is too hot, one is too cold, one is just right. The problem is that no one can know for certain when an exit is just right. Indeed, when it comes to exiting a business, you can either leave too soon or you can leave too late. “Just right” is simply not an option.   

Because too soon and too late are the only real options, the question is, how do you choose between two imperfect alternatives? The answer is to leave too soon, because leaving too late is disastrous. However, leaving too soon is the difficult choice because, at least on the surface, you wonder if you’d have been better off waiting. That is the Goldilocks Dilemma — you can never know if the timing is just right.  

My advice is to end with the beginning in mind. Allow your firm to become even greater after you depart by putting the right people and systems in place that will allow the firm to be even greater with each successive generation of leadership. I exited my company in 2019 and have watched how, even amid a pandemic, everyone has prospered. Indeed, my successors grew the firm nearly 25 percent in 2020. Our clients and employees love my successors and have shown how much they appreciate the transition. Meanwhile, my life has never been better as I write and teach.   

Be fearless! 

Succession planning can be challenging for numerous reasons, but the biggest challenges are usually internal, not external. James Clear in his book, Atomic Habits, describes three levels of behavior change. The first level is outcomes. The second is changing your process. However, the deepest level is changing your identity, or what you believe about yourself.  

Most succession plans focus on outcomes, or selling the business without considering identity — or who they see themselves as internally. This leads many to a fear the succession process and becomes the root cause of moving the subject to tomorrow’s to-do list.  

The best advisors find their identity in their businesses. The thought of not being an advisor is anathema to them. As result, their greatest fear is deciding who they are if they’re not an advisor. A friend of mine sold his business to his hand-picked successor. While the business outcome was great, internally he was a mess. Without his agency he lost his identity. This past year he started another agency because, in truth, he couldn’t re-identify as anything other than an agent.  

While no one can say what the best business succession solution is for any organization, be open to the myriad of possibilities there are in succession planning. Take it off tomorrow’s to-do list. Create a succession plan that looks out for everyone’s best interest — in which everyone wins. Indeed, if it’s not a win-win, call the whole thing off.   

Remember, you can exit too early or too late, but waiting until the time is just right is fool’s gold. Most of all, be fearless.  

**Originally published at Leadership Now