Retain Talent During The Great Resignation By Creating A Path To Ownership

A major shift has occurred, giving rise to what’s being called “the Great Resignation.” Financial advisory practices have managed to stay ahead of this startling trend, which has many business owners scrambling to fill vacancies and keep their business running on a skeleton crew. As other sectors of the economy rapidly increase compensation and benefits in an effort to lure away talent, advisors need to continue to invest in strategies and tactics that will keep staff on board. One valuable and often overlooked strategy is creating a path for staff to become owners in the practice. There are many benefits to creating a path to ownership, not just for the ambitious staff member, but for all parties. We outline those benefits below.

Benefits to the Founder
The two main benefits to the founder are a known successor and a motivated partner/staff that is equally invested in the practice. When an advisor incentivizes ownership, especially with a Nextgen advisor, they cultivate a trusted successor who will carry on their client service legacy. Having more than one owner also helps to spread risk, taking some of the pressure to manage the business and address challenges off of the founder. A person will work harder and invest more time and energy into something if they have an ownership stake. As a result, what often happens is that the value and profitability of a practice increases following a phased succession. This leads to a higher overall payout for the founding advisor.

Benefits to the Aspiring Owner
Phased successions create opportunities for Nextgen advisors who otherwise wouldn’t be able to purchase a practice outright or who don’t have the capital and skill to start their own practice. Purchasing equity a little at a time allows young advisors to secure an ownership interest while still developing as an advisor under the tutelage of the founder. As a result, they are able to set a foundation for their future and demonstrate their commitment to the practice and the founding advisor without a tremendous financial sacrifice.

Benefits to the Staff
For staff members who do not choose to become an owner, they still benefit from the stability that is achieved by having continuity in leadership. Having more than one owner ensures that there is someone to take the reins and lead the practice forward should the other owner become ill, disabled, or pass away. This creates a sense of security for staff, which often results in higher loyalty and engagement to the practice.

Benefits to the Client
The same continuity and stability that leads to staff loyalty also leads to client loyalty. Clients are more likely to stay, as well as refer friends and family members, if they know that a trusted person will be there to take care of their loved ones. The value of many solo advisor practices declines as they age, largely because their clients are also aging, often drawing down assets in retirement or transferring wealth to heirs that are not clients. Having that succession plan in place and communicating it to clients gives them peace of mind that no matter what, someone they know and trust will be there to manage their finances and care for their heirs.

The benefits to the practice and all parties are clear. However, few advisors know how to go about developing a phased succession. To help, we teamed up with Advisor Legacy and developed a guide designed to help both founders and Nextgen advisors develop a game plan for creating a path to ownership. Download your free copy now.