"A firm's ability to train and develop professionals may very well be one of its most sustainable competitive advantages. Technology, efficiency and investment in process play a role, but at the end of the day, firms that can find the best people are the ones that will be the fastest growing and most profitable."           — Philip Palaveev, "G2: Building the Next Generation"

Year after year, growth is the first priority for advisory firms. The key to unlocking growth may well be in developing a succession plan that focuses on creating the capacity and operating leverage to support additional clients, while keeping an eye on healthy profit margins to allow for reinvestment in the business along the way.

This concept is particularly relevant today as 37% of financial advisors plan to retire within the next decade, leading to the potential transition of $2.4 trillion in client assets, according to Cerulli Associates.

Many advisors might believe that succession planning is based on an "end game," but a well-crafted plan is really about developing the internal talent to create a sustainable and valuable business that's better positioned to capitalize on growth opportunities.

As your business evolves, your people will be your greatest asset. They also will account for roughly 70% of your firm's expenses, so it's critical to hire the right people and invest in their development. To get the best people, you need to give them a reason to work for you.

The ultimate goal is for them to work with you, together as a team, and help build an exciting firm that offers career advancement. An articulated growth strategy, career path and ownership opportunities represent an essential starting point in attracting, retaining and motivating talented advisors.

The challenge for the industry is that not enough firms are hiring, investing in and developing talent.

Owners continue to look for advisors with over a decade of experience who possess critical business and relationship skills. The reality is there are few superstar "free agents" in the financial industry like you would find in the sports world. It's unlikely that a brilliant 50-year-old advisor will suddenly join your firm and become its internal successor.

Accordingly, you should start thinking about team members as possible next-generation owners early in their careers and develop them to become your succession plan over time. This means a cultural change is needed, because the industry has historically been built on production and run by entrepreneurs who believe the next generation should have to "do it themselves."

Client Experiences & Outcomes

Most advisors don't start a business with the goal of managing people, but that quickly becomes the most important aspect of running it. Founders and owners often find their greatest strengths lie in business development and managing client relationships.

As a result, significant emphasis is placed on the client experience but very little on the employee experience. The good news is the succession planning process will push you to create clarity around both, as you think more critically about the clients you serve and the people necessary to serve them.

Succession planning will help identify the types of clients to whom you can deliver an exceptional experience and how to do so profitably, allowing for sustained reinvestment. The key is to clearly define the clients you want to work with and why, then develop the right talent for that purpose.

A firm can't be all things to all people and deliver a differentiated experience, so we advise choosing a niche and striving to excel in it. This will enable you to deliver on your unique value proposition and develop the appropriate expertise within your firm.

With a plan in place and your ideal clients identified, you can turn to developing a human capital strategy that clearly tracks a career progression from associate to lead planner and owner.

Defined milestones for advancement and expectations for development are both critical elements of a better employee experience. Owners who invest in their people, provide them with growth and development opportunities and have a clear vision for the future are more likely to build skilled, passionate and loyal teams.

Building a Future-Ready, Valuable Business

 This is where we challenge current owners to think beyond their firms and careers. The financial planning industry is still young, creating an exciting opportunity, and we believe responsibility, to define the future course of the profession.

Will our legacy be a thriving and diverse industry that brings financial health and wellness to significantly more households, or one that remains a disaggregated patchwork of producers?

We sincerely hope it's the former. Fortunately, committing to developing next-generation talent within our own firms can lead to incredible benefits for individual businesses as well as the overall profession.

Building a future-ready firm requires an intentional approach to talent development and diversity. The goal for many firms is driving sustainable profit and long-term valuation.

Investing in talent allows for service diversification and a deep bench that can provide greater capacity. Elite RIAs emphasize human capital development and enjoying twice the productivity of other firms, according to Investment News' 2019 Elite RIA Study.

Additionally, Advisor Growth Strategies' recently released M&A research report, "The RIA Deal Room," found that firms prioritizing talent and a robust platform are more likely to experience success in the RIA M&A market.

Yes, developing talent takes time and succession planning requires discipline, hard work and stretching beyond your comfort zone. But how did you build your current business?

We would wager that all these aspects played an integral part. Remember that succession planning and developing next-generation talent can be pivotal to growing a healthy, sustainable and more valuable business.

Brent Weiss, CFP, ChFC, is co-founder and chief evangelist of Facet Wealth. Brandon Kawal is principal at Advisor Growth Strategies.