Wipfli logo

Valuation & Litigation Support


Delaying your transition plan only hurts your wealth and asset management firm

Jun 09, 2021

The principals of wealth and asset management firms are known for being dynamic, motivated by a vision and driven to succeed — and their ability to always look forward.

With this one possible exception: succession.

It’s hard to think about the day you’ll leave the firm that you poured your blood, sweat and tears into. But putting it off only hurts the firm and limits your ability to influence its future operations under new owners.

Succession planning doesn’t need to be an emotional process. Putting the future of the business in business-like terms helps you establish your destination and how to reach it while making life easier today for all parties involved tomorrow.

Set the stage

For entrepreneurs, especially those in the baby boomer demographic, the next five years are critical. To secure a safe, secure retirement post-exit, you need to weigh these considerations:

  • If the firm is your star asset, its worth must be understood in order to calculate its impact onyour entire portfolio.
  • Articulating goals for life beyond your owner-operator days helps to determine whether the star asset has enough value to fund those goals comfortably.
  • Waiting until right before retirement to choose a succession strategy and build a plan around it is often too late to maximize value.

You should not go it alone. No owner can handle every aspect of a succession plan — from determining the transferability of your firm, to understanding the successions options and how these options will impact you and the firm going forward, to finally setting a plan in motion. It takes consideration and should involve the input of your advisors, who have been through transitions before.

Getting a professional team on board can help achieve the over-arching goal of any succession plan, which be to convey stability, positive patterns of performance, profitability and a vision that stands the test of time.

Solidify your business plan

Potential buyers and successors want assurance a  firm will continue to be successful without the owner’s presence and influence. So entrepreneurs need to demonstrate they have focused on the continuous strengthening of the firm across its staff, structure, strategy and operations, whether internal or external.

A closely-held financial services firm should also be able to demonstrate that it is self-sustaining, viable, stable and can withstand economic, competitive and financial shocks.

A well-thought out business plan can convey all your strategies to potential buyer and successors.

The business plan traditionally provides a detailed description of the business and a foundation for determining the baseline valuation of its worth. It can range from a formal, detailed analysis and description to a summary document comprised of just a few paragraphs, as long as it covers everything from quantitative data — performance facts — to qualitative information, such as the genesis of the business and the owner or management team’s vision going forward.

The business plan should also describe the strengths, experience and responsibilities of the management team.

Working in tandem, the succession plan then shows how these elements will be deployed over time to keep the business running smoothly and engender a seamless transition from the owner’s leadership to the next team. The plan should also cover operations in case a principal is unexpectedly unable to continue to work.

The succession plan describes the current owner’s approach to leveraging key functions across their team and indicates the high-potential leadership candidates, if not the appointed successor.

Plan 5-7 years ahead

Five to seven years is the optimal time span to cover in the succession plan. The plan should also articulate how the ascending team is equipped to address market developments in refining the firm’s platform and service offering, its experience in managing employees and its ability to grow revenue and profit

The farther in advance you can plan, the more it will benefit you today. The gradual delegation of responsibility enables you to keep a strong hand in the daily operations of the business while also operating at a higher, more strategic level. You can now spend more time on the direction of the organization, while the upcoming management team sharpens its edge on the details.

Ideally, you’ve entrusted your team enough so you can answer “yes” when asked if you can leave your firm for a month knowing it will be there, and in good shape, upon your return.

Planning ahead will also give you an opportunity to implement changes to maximize the value of your firm, such as increasing cash flow and margins, deepening client relationships or increasing employee satisfaction. 

Know your transition options

There are several types of transitions available to the owners of wealth and asset management firms:

  • A merger with a competitor or partner whose client base, processes and services would create synergy that enhances the value of the organization’s existing offerings and/or escalates revenue and/or profit
  • An outright sale to another firm — whether strategic or financial
  • A management or employee buyout
  • A family buyout

The transition choice you make will dictates your role, if any, after your succession plan has been implemented. If you know you want to be involved in a consulting capacity, for example, this should become a consideration in the design and execution of the firm’s business strategies to support that role.

How Wipfli can help

Our dedicated wealth and asset management industry group will work with you to ensure your succession plan achieves both your personal financial and professional goals. Whether it’s determining what you want to do, maximizing your value or executing the M&A, we can help.

Learn more on our web page, or check out these educational articles:


Paul T. Lally
View Profile
Is your firm in prime?
See what your firm needs to operate at optimal level.
Learn more