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Neglecting Business Succession a Growing Problem for Advisers, Clients

A business succession planning expert predicts problems on the horizon for many financial advisers and their SME business clients, where each may be putting off their succession plans until it is too late.

Craig West, Founder of consulting firm, Succession Plus, stresses that a business succession or exit plan is not a project or document.  Rather, he says, it is a process which often takes anything from 18 months to 5 years. “In fact the most successful exit strategies have been implemented at least 3 to 5 years prior to exit,” he said.

… 33% of family business owners are entirely reliant on the sale of their business for cash to fund their retirement

In a recent statement, Mr West warned there are an increasing number of SME owners approaching retirement age who are badly prepared for succession.  Based on a survey released in June this year, Mr West revealed  that 33% of family business owners are entirely reliant on the sale of their business for cash to fund their retirement, but 75% have not agreed or documented any proposed succession strategy.

Mr West also took time to share his concerns with riskinfo about what he sees as two critical problems facing financial advisers.  The first of these issues is that  many financial planners are themselves guilty of failing to plan in sufficient time or detail for the succession process involved in their own business.  Mr West says this is due to the same reasons experienced by their clients, ie maintaining a strong focus on managing the day-to-day aspects of their business and keeping up-to-date with compliance and other issues.

… to ignore the value of a clients’ business in wealth protection and wealth management planning could be potentially negligent

Of equal concern to Mr West is his observation that many advisers either miss or ignore the importance of their SME clients’ business as a strategic part of their wealth creation strategy.  He suggests that to ignore the value of a clients’ business in wealth protection and wealth management planning could be potentially negligent.  Using another example to make his point, Mr West commented, “If I came to you seeking advice in relation to $1 million in direct shares, $1 million in managed funds and $1 million in Cash Management Trust investments, and you completely ignored the direct shares in your advice, then it would be easy to argue that you are negligent,” he said.

Emphasising his point about the lack of business succession as a growing problem, Mr West referred to another key finding from the survey, in which it was revealed that the number of business owners in the 60 to 69-year age bracket has increased by 16% in the last three years, from 21% in 2010 to 37% in 2013.

To address this concern, Mr West has recently published his book Enjoy It – Business Succession & Exit Planning, which will be launched later this month.

“This challenge, if not met, will lead to a significant retirement funding gap for a large number of Baby Boomers approaching retirement”, said Mr West.

  • Will be interested in reading the book as I will start preparing for succession planning as I will look at transitioning my business in the next 5 to 8 years