Glenn and Lori are the dynamic duo behind a highly successful financial services firm in need of a succession plan for when it’s time to exit their business.
They’ve built an illustrious reputation over the past two decades. Starting as insurance agents, they expanded their offerings to include investment management, wealth and financial planning, and long-term care planning.
As retirement approaches, the future ownership of the firm and ensuring its continuity have become frequent topics of discussion.
Both Glenn and Lori aim to transition into retirement gradually, with Lori likely stepping down first, while Glenn plans to remain in the business for some time, gradually reducing his involvement. They’re determined to create a plan that preserves their firm’s legacy and fosters internal talent for succession.
Glenn and Lori’s Business Backstory
Glenn and Lori firmly believe in the talent within their firm and are committed to nurturing key individuals who can eventually become full owners. Their team-oriented approach encourages universal client interaction, allowing clients a glimpse into the future succession of the firm.
With a strong focus on growth, client acquisition, and revenue generation, they’ve cultivated a culture of effective leadership, accountability, and management. As a result, their firm is now estimated to be worth $1,000,000.
Currently structured as an LLC and taxed as a partnership, Glenn and Lori consult with their tax and legal teams to explore options for enhancing the ownership structure.
After careful consideration, they decide to amend their operating agreement to include stock. They authorize the issuance of 200,000 shares, with 100,000 designated as treasury stock and the remaining 100,000 evenly distributed between Glenn and Lori. The current stock price is set at $10.00 per share.
Hand-Picked Team Members Gain Ownership
Glenn and Lori identify four team members whom they believe should be included in the future ownership of their firm. Since Lori plans to reduce her involvement earlier, she decides to sell 20,000 of her shares, dividing them equally among the four team members at the same price per share.
However, the younger team members find the $50,000 price for their shares unaffordable. Demonstrating their commitment to nurturing talent, Lori offers a loan to each of the new partners through a promissory note, with a nominal interest charge. As partners, they’ll also receive 5% of future firm distributions.
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Given the firm’s consistent double-digit growth, these distributions are expected to be substantial, allowing the partners to repay their loans over time.
Building a solid succession plan requires expert guidance and support. Regardless of the chosen model, it’s crucial to have a trusted partner who can navigate the multiple steps and nuances of formal continuity and succession planning.
Realizing this, Glen and Lori reach out to Next and partner with trusted FIG team members to implement the 12-step Continuity and Succession Planning process.
Case Study: Glen and Lori’s Next Journey
Through their partnership with Next, Glen and Lori successfully address the various steps and challenges outlined in their case study. Next’s comprehensive approach to continuity and succession planning empowers them to build a solid plan, execute it effectively, and achieve a smooth transition.
With Next’s guidance, Glen and Lori can confidently embrace their retirement while preserving the legacy of their firm and nurturing the next generation of leaders.
A detailed step-by-step financial services succession plan can set the stage for a positive succession experience and allow them to look forward to what’s next.
These 12 steps from our Next Continuity and Succession Planning offering prove to organize and execute a successful succession plan for Glen and Lori and put their mind at ease.
Step 1: Continuity Basic
Recognizing the importance of preparing for unexpected events, Glen and Lori engage with Next to establish a basic continuity plan. Next helps them develop protocols and an implementation process that outlines the necessary steps to operate smoothly and minimize any disruptions in the event of a long-term disability or untimely death.
Step 2: Succession Discovery
Succession planning experts assist Glen and Lori in understanding the unique succession plans envisioned by each advisor within their firm. By conducting in-depth interviews and assessments, Next helps uncover the preferences, strengths, and aspirations of the team members. This information is crucial in adapting the business to future changes and aligning the firm’s goals with those of its talented individuals.
Step 3: Business Consulting
To further enhance firm development and valuation, Glen and Lori leverage the comprehensive and strategic business model evaluation provided by Next. Through a detailed analysis of their operations, Next identifies areas of improvement and recommends strategic initiatives that optimize processes, attract new clients, and increase enterprise value.
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Step 4: Succession Plan Mapping
Next specialists work closely with Glen and Lori to create a specific succession plan that considers the identified future owners and their roles within the firm. The plan is designed to ensure that everyone involved understands their responsibilities and works together towards achieving the final objective of a smooth transition.
Next also emphasizes the importance of staying one step ahead by incorporating flexibility into the plan, allowing for variations and additional steps based on changing needs.
Step 5: Back Office Logistics
Understanding the complexities of merging or acquiring another firm, Glen and Lori rely on Next to help them develop efficient back-office methods. Next assists in identifying and establishing necessary alliances and partnerships that can support the firm’s succession plan.
By streamlining the logistical aspects of the transition, Next helps Glen and Lori navigate the challenges associated with merging or acquiring another business, ensuring seamless integration.
Step 6: Financing Structure
Using a comprehensive overview, Next provides Glen and Lori with funding options available to support their succession plan. By evaluating the financial needs of the firm and exploring various financing strategies, Next helps Glen and Lori attract or retain the necessary capital for a successful transition.
Step 7: Document Analysis, Coordination, & Review
Next assists Glen and Lori in analyzing and coordinating the essential documentation elements of the succession planning process. This includes reviewing legal agreements, operating agreements, and other critical documents to ensure they are aligned with the succession plan.
Next also provides guidance on any necessary updates or modifications, ensuring that all documentation is accurate, comprehensive, and legally sound.
Step 8: Strategic & Tactical Growth Modeling
Recognizing the importance of continued growth and value creation while executing their financial services succession plan, Glen and Lori work with Next to develop strategic and tactical growth models. By leveraging Next’s expertise, they can identify opportunities for expansion, explore new markets, and implement growth strategies that align with their succession plan.
This ensures that the firm and its team members thrive even after the plan is executed, maximizing their long-term success.
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Step 9: Culture Coordination
Next helps Glen and Lori address any concerns or disparities in different business cultures that may arise during the succession process. By facilitating open communication and fostering understanding among team members, Next ensures a smooth cultural transition.
Step 10: Ongoing Business & Succession Review
To ensure the success of their journey, Glen and Lori engage in regular communication and plan reviews to ensure accountability for both parties. This ongoing collaboration allows them to adapt to any changes or challenges that may arise during the succession process.
In-house succession planning experts provide the necessary support and guidance to address potential obstacles and adjust the plan as needed, ensuring a thriving transition and long-term continuity.
Step 11: Plan Executive & Transition
With support from their succession planning specialist, Glen and Lori execute their plan, initiating the firm-blending process, and ensuring that all stakeholders are well-informed and involved. This meticulous plan execution lays the foundation that maintains the firm’s legacy while enabling the next generation of leaders to take charge.
Step 12: Advisor Exit Implementation
Finally, Next helps Glen and Lori navigate the process of transitioning away from the business. Whether it’s an abrupt exit or a methodical transition, the succession planning expert ensures the desires and preferences of everyone involved are respected and accommodated.
By providing comprehensive exit implementation support, Glen and Lori successfully navigate this critical phase of their journey.
Take Your Next Step
Our Next Continuity and Succession Planning offering is a comprehensive program for any financial services succession plan, designed to connect financial professionals like you with expert succession plan advisors.
By partnering with us, you can have access to our proprietary Successful Succession 12-Step Process, empowering you to navigate the complexities of succession planning and ensure a smooth transition for your business.
If you find yourself in a similar position as Glen and Lori, who were determined to create a plan that preserves their firm’s legacy and fosters internal talent for succession, don’t hesitate to reach out to us today.
Our team of experienced professionals is ready to assist you in developing a tailored succession plan that aligns with your unique needs and goals.
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