Today's succession planning is an important career-long activity that promotes good practice management. Having the "end game" in mind, and knowing and working toward what will make one's firm valuable along the way helps to maximize the potential of the practice.
Evolution of succession planning
As recently as 15 years ago, the predominant belief was that value was vested in the individual financial professional and not in the practice. As a result, owning a practice was viewed more as a job than as a business. However, this environment is changing rapidly due to a more competitive acquisition landscape, which demonstrates the value that financial representatives can build had not been fully realized in the past. Indeed, value lies not only in the practice's assets or intellectual property but in client relationships as well.
Doing what is right for clients and protecting the equity in a business are mutually dependent. The only way to ensure both is to plan for a seamless transition to a successor who has a clear understanding of the future needs of clients, their families and their assets. 
Benefits
Done correctly, succession planning improves the practice, but the exercise also has benefits for both young and experienced representatives and, perhaps most important to the success of a practice, the clients.
Young representatives coming up into a practice that actively practices succession management tend to receive real-time opportunities for learning from a senior mentor and, critically important, (instant) access to a market. One of the industry's greatest challenges is keeping younger reps encouraged enough to work through the early years of building a practice. In a team environment, with a succession strategy in place, younger representatives may not have that same struggle if they're working with a senior rep and his or her clients.
More experienced representatives are closer to realizing the benefit of what they've worked to build. With a clear plan in place, and having used valuations and continuity contracts throughout their careers, an experienced rep would have the time and ability to build the practice to be worth what he or she has worked for. The rep in this ideal situation would also have a good idea of which of the younger reps is the best match for his or her business and clients.
Most importantly, clients benefit from having a rep who has thought through the future and may have started involving younger reps in getting to know these clients and forming deep relationships. It's really no longer acceptable to just leave a client with a list of potential contacts upon one's retirement.
Succession management: Key components lead to best practices
Practice Valuation
Understanding your current business value is a key step in building the practice you envision. It not only helps you see where you are today; it provides the basis for getting where you want to be in the future. Once you have completed your valuation and know what your practice is worth and the revenue generated from your insurance-based trails, you will know what is required to reach your equity and succession goals. And you will be better prepared to build a practice that will be desired by potential buyers.
Client Relationship Theory
Because your client relationships are a key factor in assessing the future value of your client book, the depth and length of these relationships directly affect the probability of future revenue events. While the client life cycle will dictate client needs, therefore providing a baseline probability of future events, the client relationship will determine if these events are more or less likely to happen than the average.
As previous transitions of financial advisory practices have demonstrated, if the client relationship is strong, it is more easily passed by a retiring advisor to a successor. Clients who are accustomed to consistent and thorough contacts are not only more likely to transfer their loyalty to the incoming advisor, but more likely to entertain ideas for new investments and services.
Because the client relationship and not past product sales or services drives future income from a client book, a renewed focus on how this relationship is managed will be the key to increasing the value of a financial representative's practice.
