Internal Succession Planning: 5 Key Steps

Internal succession may offer a higher degree of continuity across the practice and enable advisors to maintain long-standing relationships and values. But identifying and developing a successor can be challenging. Consider these steps towards an internal succession to ensure a smooth transition for clients and staff.

More than one-third (37.4%) of financial advisors plan to retire or scale back within the next decade.¹ Yet, among those nearing this transition, 26% remain uncertain about how their succession will take shape.²

While practice ownership transitions can be complex, internal succession offers a compelling path — one that supports continuity for clients and staff and gives advisory owners the flexibility to either fully retire or remain involved in a limited capacity.

When comparing internal succession to a direct sale, merger, or acquisition, internal succession often results in a higher degree of continuity for clients and staff. It also offers the advisory owner the flexibility to either fully retire or maintain a limited role.

But identifying and developing a successor can be challenging, and it’s a decision that has significant implications for all involved, from the advisory owner and the chosen successor to staff and clients.

Without a thoughtful approach, the absence of a well-matched successor can put client relationships, practice continuity, and even your own transition plans at risk. To orchestrate a successful handover, it's important to understand what it takes to effectively develop an internal successor — and what a realistic timeline for that handover may look like.

Is an Internal Succession Strategy Right for You?

Hiring and developing team members through the lens of succession is one of the most important — and often most complex — challenges advisory owners face. Internal succession is often viewed as the more straightforward option, leading many owners to favor internal candidates over external buyers. In fact, nearly half (42%) of advisors plan to transition their business to a partner, junior advisor, or family member upon retirement.³

Given the scale of expected retirements in the coming decade, this decision has far-reaching implications — not only for practice continuity but also for the transfer of an estimated 41.4% of industry assets.⁴ For internal succession to succeed, the strategy must be deliberate and forward-looking. It's not simply about identifying the right person, but preparing them, and the practice, for a smooth and sustainable transition.

While an internal successor offers a high degree of continuity for clients and staff due to their first-hand knowledge of the business and familiarity with clients, the perfect internal candidate to lead the practice forward doesn’t always exist. Or, your preferred successor may lack the necessary capital to buy the practice on your desired timeline.

This is where taking a team-based approach to managing human capital can help build continuity well ahead of a business transition — by promoting a shared sense of ownership over client relationships. To help ensure your team development efforts are effective, assess the following questions:

• Is your process for people development strategic and intentional?
• Are you making the right introductions for potential successors to clients and centers of influence?
• Are you building your team members’ skill sets for long-term success?
• Are you considering their career goals and timelines?

Timeline for Internal Succession

Of all the transition options, internal succession requires the longest runway. It takes time to identify and develop a successor — which is why we recommend a minimum of five years to see this option through.

A thoughtful timeline also allows you to develop more than one team member, which could reduce the risks of relying on a single successor and strengthen your overall bench.

Years 1 – 2

• Set personal objectives and determine which succession strategy best suits your practice.
• Seek an objective practice valuation — then optimize your business structure to address any areas of weakness.
• Identify internal successor(s): Look for individuals who demonstrate character, values, leadership potential, and financial readiness to carry the practice forward. Consider how you are developing talent through intentional mentorship, meaningful introductions to clients and centers of influence, and opportunities that stretch their skill sets for long-term success.

Years 3 – 5+

• Continue to develop your identified successor(s). Continuously increase their responsibility and visibility to fully prepare them to take the lead.
• Structure and execute on your succession plan, with a focus on client retention and recruitment of next-generation advisors and investors.
• Include work processes, both business branding and head advisor branding, and team building with an emphasis on continuity and long-term relationships. 
• Finalize the transition.

5 Keys To a Seamless Internal Transition

1. It’s never too early to start planning.
   Internal succession requires a longer runway — up to 10 years before your planned exit. It’s also wise to consider more than one viable option. Planning early allows you the time to source, develop, and mentor young advisor talent and to consider financing options. When assessing successors, start with the end in mind. Define the vision for ongoing practice development and what long-term success looks like.
2. Internal buyers often lack capital, but this doesn’t have to be a dealbreaker.
   Consider longer-term financing or an earn-out provision. Many modern deals include an earn-out which provides the selling advisor a monetary incentive based on achieving specific client retention. It emphasizes the importance of managing the client experience and actively managing practice value through factors like healthy organic growth rates, cash flow, and client age — not just gross revenue.
3. Actively evolve your succession plan.
   Once clear on your transition needs, focus on talent acquisition. Many advisors discover they need to change course along the way, realizing that their first choice for an internal successor isn’t the best choice in the long-term.
4. Include the eventual successor(s) in client relationships far in advance of an expected retirement.
   Sourcing, developing, and mentoring young advisor talent to become potential successors requires an intentional approach and a commitment to investing in their careers. Adding younger advisory talent to your practice can position the business to attract and retain a younger client base, generating higher growth rates to balance clients in the decumulation phase of their financial journey and diversifying assets under management — a driver of practice valuation.
5. Ensure clients will have continuity in services, as well as in investment management and product selection.
   A smooth transition isn't just about practice ownership — it's about client confidence. Clients want to know their service experience and investment strategy will remain consistent. Be transparent, involve your successor(s) early, and give clients opportunities to build trust and rapport through shared meetings, planning sessions, and collaborative communications.

Take a Thoughtful, Proactive Approach

Many advisors devote their careers to building a successful business grounded in deep client relationships, trust, and long-term planning. Despite advisors’ best intentions, succession planning is often delayed until the final years of practice ownership.

Take a thoughtful and proactive approach to protect the value of your practice, support your team's development, and ensure clients experience continuity in both service and investment management. Succession isn't just about stepping away — it's about setting the next chapter in motion with confidence and clarity.