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The Keys To Unlocking Your Understanding of Succession Planning

Updated: Jan 4

A few years ago, I was invited to attend and speak at a 2-day advisor retreat. This was an event organized by advisors for advisors who wanted a forum to connect with their colleagues and peers, talk about issues of the day in a relaxed environment, and perhaps learn a few things from some of the best minds in the industry.

The theme of the retreat that year was Succession Planning. Organizers invited 12 advisors from various dealerships across Canada, each with at least 20 years' experience in the industry and AUM well north of $200M but with very different business models and team structures.

They were keen to better understand what different advisory firms were doing with respect to Succession Planning, including, for example, what plans, if any, they might have already had in place and what best practices they were using.

And they started the retreat by asking a very simple but compelling question:

What does the term Succession Planning mean to you?

Listening to these advisors was eye-opening because it became very clear very quickly that the term Succession Planning meant different things to different advisors.

For example,

  • Many advisors equated Succession Planning to the sale of their business and eventual retirement, which is the biggest misconception about Succession Planning.

  • Some viewed it as their plan in the event they were to be ‘hit by a bus.

  • A couple advisors thought about Succession Planning as a means to change the nature and scope of their role in the business, to build an enduring business model, and leave a legacy.

  • One advisor said he thought Succession Planning was about all the above.

Quite clearly, the terms Succession, Exit and Contingency planning were being used by members of this group interchangeably.

It was immediately apparent to the organizers that what the group needed was to have a common understanding of a few key terms and definitions if they wanted the retreat to be productive and achieve its objectives.

After all, it’s pretty hard to have a meaningful conversation when people aren’t speaking the same language.

I was asked to share with the group what I thought to be the best working definitions for the terms Succession Planning (SP), Exit Planning (EP), and Contingency Planning (CP). Once these advisors realized the key differences between these 3 concepts and how they ought to work together as part of a broader master plan, it had a profound impact on not only how they conversed with one another during the rest of the retreat but, more importantly, how they started thinking about and planning their own future going forward.

Set out below is what I shared with them that day and how I encourage all my clients to think about these 3 concepts because it's pretty difficult to move forward with an effective master plan without a full understanding of what each planning term truly means.

Succession Planning

Succession Planning

The term Succession Planning refers to the plan that gradually transfers ownership, leadership and management of an advisor’s business INTERNALLY to a new generation of advisors.

This transition of ownership, leadership, and management can be to one individual or to multiple people. It can be a one-time 100% transfer of ownership or a partial transfer of ownership interest over time in different tranches.

In most cases, the founding advisor will continue to play a role in the firm for an ongoing period and in whatever capacity they want. It’s completely up to them. I’ve got clients who have structured their succession in such a way that they continue to stay engaged by doing what they love doing – i.e. managing a small number of their top households while also playing a role in new client and business development – but with more manageable hours and without having a majority ownership stake in the business.

At its core, Succession Planning should really be thought of as a core element of an advisor’s plan to Grow his or her business by:

  • Leveraging the talents of next generation advisors;

  • Creating a business entity and model that doesn’t rely on the founding advisor; and

  • Creating a firm that endures beyond the founding advisor’s career. 

Exit Planning

In contrast, EP refers to a plan that transfers ownership, leadership and management of an advisor’s business EXTERNALLY to a 3rd party.

Often, this is your more traditional one time 100% sale to a 3rd party Buyer with a brief period of transition where the founding advisor plays a role aimed at helping the Buyer retain the book of business but then doesn’t stick around after that.

An Exit Plan is best thought of as an exercise to monetize the value of your practice or business. It also represents the end of the advisor’s firm as well as their career.

The key difference between a SP and an EP is that the sale in an EP is to an EXTERNAL 3rd party and a sale to 3rd party is not likely to have the founding advisor’s firm – its name, brand, culture and values - endure beyond the sale.

In other words, in an EP, the understanding and implication is that the founder’s business and firm comes to an end. It does not endure beyond the founder’s career. For some advisors – especially those who have invested heavily in a brand – this is a very important concept and idea to keep in mind.


This is not to suggest that one plan is either better or worse than the other. That’s not the point.

The point is simply that they are different - different kinds of transactions with a different kind of transition for the founder, requiring a different kind of process resulting in different outcomes for all parties involved, especially the founding advisor.

My sense is that the vast majority of advisors – especially those without adult children who may be thinking about entering the business – think of an Exit Plan when they think about or use the term Succession Planning.

And that’s a shame because they lose sight of the myriad of value-added options and scenarios that are then available to them with a well-thought-out SP.

Contingency Planning

CP simply refers to the transfer of ownership, leadership and management of an advisor’s firm either INTERNALLY or EXTERNALLY in the event of an unplanned or random event – i.e. death or disability.

The element of the CP that distinguishes it from either a SP or EP is this notion of an unplanned or random event.

Contingency Planning then is a form of insurance to preserve the value of a business and ensure that it continues to function even if the founding advisor is unable to continue to perform his or her duties for whatever reason.

A lot of advisors have in place a Buy/Sell agreement to deal with death or disability, which is good, but unfortunately, they also tend to think of this Buy/Sell agreement as their SP or EP as well, which is a shame. It’s not. Don’t fall into that trap. The Buy/Sell agreement is not designed for those purposes.

The Bottom Line

Here are the key points I hope you take from this article:

The concepts of SP, EP and CP are not interchangeable. They are 3 very different concepts.

One is not inherently better or worse than the other.

They are each simply meant to address 3 very different challenges that all advisors face.

Conventional wisdom would suggest that you must choose at some point in your career between an internal SP…and external sale to a 3rd party.

This kind of thinking is outdated and misguided.


When you think about these terms the way I’ve described them then you begin to realize that a SMARTER AND MORE EFFECTIVE APPROACH is for an advisor to develop a more comprehensive master plan that incorporates all 3 of the plans we’re talking about – SP, EP and CP.

Right? You need a plan to grow your business and achieve your growth targets and objectives; just like you need a plan to monetize your business and reap the rewards of your life’s work; and you most certainly need a plan to protect and preserve the value of your business in the event of an unforeseen event.

It’s the development of one overarching and comprehensive plan that incorporates all 3 of these different scenarios that is required. This is what we mean when we use the term Master Plan. It's easier to digest this way isn't it? It's all part of the same plan!


Providing a clear working definition and understanding of these concepts has proven to be enormously helpful to advisors struggling to develop their succession and exit strategies.

What is also helpful is providing them with a strategic framework or mental model to help them better understand how these concepts work together as part of a broader Master Plan for their business.

That’s the topic of our next article.

In the meantime, if you’re interested in learning more about TPC’s approach to strategic planning and how to create your firm’s Master Plan, please feel free to reach out me directly at

Till then...

Afsar Shah

Did you understand the difference between the planning concepts before reading this article?

  • Yes - I did.

  • No - This has been enlightening.


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