How Advisors Can Navigate the Succession Crisis in Wealth Management

When it comes to establishing a clear framework for succession, veteran financial advisors like Tyson Ray firmly believe that succession planning should be treated as the emotional process it is, not the transactional one many advisors view it as. The reality of advising is that every advisor will exit their practice at some point, either by design or by default.

As such, although it can be uncomfortable to seriously consider a meaningful exit strategy, doing so sooner rather than later can help advisors feel more confident in the state of their business and the compensation they'll receive upon exit. Putting this concept into practice is easier said than done; however, resources such as Ray's book Total Succession are useful for approaching succession in a steady, structured, and practical manner.

The SPACE Framework

See, Prepare, Act, Commit, Exit. These five steps outline Ray's "SPACE framework," a structured approach that helps advisors think clearly about succession, regardless of how close or distant their exit may be.

Planning for succession can feel overwhelming at times, in part because some advisors feel they must put their entire exit plan together at one time. This kind of "analysis paralysis" often does more harm than good and usually leads advisors to put off their exit until external factors force a decision for them.

Ray created the SPACE framework to help advisors avoid falling into this trap of what he calls the "someday" mindset, noting that waiting too long limits an advisor's options, thereby increasing the chance their exit will ultimately be reactive, rather than strategic. By taking small but prompt steps toward succession, advisors give themselves more freedom to exit on their terms.

Preparation as Value

Although the clarity that preparation brings is worthwhile in its own right, having a strong exit plan in place can help advisors build business value well before exiting, even if they don't decide to sell. Ray suggests that by seeing their business as something that could be transitioned tomorrow, advisors can improve scalability, team continuity, and client retention, while potentially increasing enterprise value.

These benefits may stem from a deeper sense of freedom, a result Ray often observes among advisors who complete the SPACE process. Because they have greater agency over their future, advisors can work knowing that their retirement is something they control, not the other way around.

It's also worth noting that there are circumstances in which succession isn't merely advisable; it's mandatory. For example, advisors who serve clients as fiduciaries must treat succession as a solemn responsibility; failing to do so can put clients, staff, and families at risk, especially in the event of illness or death.

Succession: Helping Others by Helping Yourself

Regardless of how prepared they are to exit their businesses, advisors should keep in mind that succession affects many more people than just themselves. Their clients, teams, and families benefit from a smooth transition that ensures all parties are taken care of. As such, it can help to think of effective succession as a win-win for advisors. Not only will they benefit in the short and long term, but those around them will benefit as well.

Tyson Ray states as much in Total Succession, noting that by working through succession procedures, advisors can take on an otherwise daunting aspect of business ownership with confidence.

_{The information provided in this article is for general informational and educational purposes only. It is not intended as legal, financial, medical, or professional advice. Readers should not rely solely on the content of this article and are encouraged to seek professional advice tailored to their specific circumstances. We disclaim any liability for any loss or damage arising directly or indirectly from the use of, or reliance on, the information presented.}