The real intent of succession planning is to “future-proof” the business—by developing a strategic guide that builds upon the leader’s vision with a focus on sustainable scale and continual growth for the future of the firm. Here’s how we did it…
Almost every business journey starts the same way: An ambitious entrepreneur dreams of building an enterprise that will stand the test of time. However, I’ve seen far too many leaders — particularly those in the wealth management space — achieve their dreams of building a successful business, only to recognize the need to create a succession plan far too late in their journey.
It doesn’t have to be this way.
The concept of “succession planning” is often viewed only as a means to an end, designed to fill a gap for an outgoing leader to ensure continuity. While that is one outcome of such a plan, there’s much more to it.
The real intent of succession planning is to is to “future-proof” the business—by developing a strategic guide that builds upon the leader’s vision with a focus on sustainable scale and continual growth for the future of the firm.
As the founder of a firm that has counseled financial advisors and firm owners on finding their “best business lives” since 1998, I’ve been keenly aware of the need to look more closely at our own business: where we are today and our vision for tomorrow.
Our own succession journey started nearly six years ago when my son Louis Diamond joined our team. At the time, it wasn’t a given that Louis would take over the business. He had a lot to learn about the consulting practice I’d built over two decades, and I needed to gain the confidence that he would embrace and espouse our firm’s core values.
But Louis won my trust, and today, we announced that he would assume the role and responsibility of President of Diamond Consultants, while I retain the title of Chief Executive Officer—serving as “co-leaders” to drive the firm into the next chapter. He’ll focus on turning our practice into a streamlined enterprise; I’ll focus on continuing to help fill our industry’s knowledge gap by writing and publishing perspective and commentary. And we’ll both continue to serve as trusted counsel to the industry’s top financial advisors.
The lessons we learned
This succession planning process has truly been an education for us. Even our own knowledge combined with the guidance of trusted counsel did not prepare us for several important “trial by fire” lessons. As such, we found these 5 key learnings may be helpful to advisors and firm owners who are embarking upon their own succession planning journey.
- Find the “right fit” – While having a family member step into the role is nice, it’s not always possible or the right choice. Be receptive to broadening your search: Don’t look for a clone of yourself, but instead someone who shares your values and sensibilities, even though they may differ in style, experience or knowledge. Ultimately, the successor needs to be motivated to take on the role and not feel pushed by another’s agenda—that is, they really have to “want it.”
- Plan, prepare and be inclusive – The decision to assign a successor is not one to take lightly. It all starts with having well-defined goals for now and the future. Discuss it first with senior leadership and trusted colleagues to gain buy-in. Then, prepare both an internal narrative as well as an external communications plan to ensure that all stakeholders are aware and feel comfortable with any transitional processes.
And don’t overlook your staff: The transition should be an open and inclusive process for your whole team, not just leadership. Keep in mind that there will always be staff members who are afraid of change, making it even more critical that the message is delivered with sensitivity, is clear on how they will benefit from this evolution, and that there’s an open door for them to voice any concerns along the way.
- Don’t micromanage – It’s critical to let the next gen leader find their own way. (In our case, as his parent, this was a really tough one for me!) While they may not handle a situation the same way you would, you’ll find it often ends with the same conclusion—and they may even get there faster than you might have.
A good way to gauge a successor’s readiness for responsibility while giving them space to learn from mistakes is to set up some “test runs”—that is, carefully planned opportunities to lead important projects and interface with key team members and clients. If there are skill deficits, be willing to speak openly about them. No one is perfect, so let them learn from their mistakes, develop their style in the process, and fall in love on their own terms with leading the business you started.
- Create boundaries – Any family team knows the challenge of dropping the mother/son or father/daughter relationship at the office. However, families are not alone here: It can be difficult for anyone with a long-standing bond. Find ways to draw clear lines between personal and business relationships that you both can respect and abide by. Be mindful that they have a job to do that is completely unrelated to any personal connection you may have.
- Be open-minded – The future of any firm lives in new ideas and opportunities, free of insular thoughts and complacency. It’s important that everyone remains receptive to new ideas, processes and even advice. For instance, as the first gen leader, you’ll need to resist insular thinking and open your mind to ideas designed to energize the firm for the near- and long-term. And likewise, the next gen may be striving to “go it alone,” reluctant to reach out for help. Being headstrong or inflexible will not make for a healthy transition—focus instead on objectivity and acceptance.
And make sure you commit to a clear roadmap for offloading some of your responsibilities—your company’s journey can’t move forward if you’re holding on to the present.
It’s truly humbling to consider having reached a point in your business life where you are thinking about succession and how to create a lasting and sustainable legacy of what you built and nurtured.
At the close of 2020, I wrote an article that discusses the expanded role of next gen advisors this year and beyond and how their voices will have the most significant impact on the world of wealth management going forward.
And in our case, Diamond Consultants is lucky to have found a next gen successor to lead us into that new world—and decades after.