Craig West (left) and Venn Williams

Succession planning is becoming a big area of opportunity for financial planners as baby boomers retire in droves.

Craig West, executive chair at Succession Plus explains that many baby boomers are business owners who require additional support along the journey to retirement because their affairs are more complicated.

“They’ve got more assets, investments and multiple structures,” he tells Professional Planner.

“During Covid-19, many delayed their exits because business prices were deflated and the economy was full of uncertainty. They held on for longer, sometimes for an extra three to five years.”

Succession Plus partner Venn Williams notes that while many advisers target high-net-worth clients, the small business owner market is quite neglected. Many of these are mom-and-pop operations and have been putting their money into their businesses rather than into shares or other investments.

Venn adds that their business premises – be they factories, warehouses, offices or shops – are often held by the owner’s SMSF. “That is where we work with financial advisers,” he says.

“Also, many of these owners have never used a financial adviser in their lifetimes and we often introduce them to an adviser.”

Teamwork required

Even though he is a succession planning expert, West says there’s a lot of work that his business simply cannot do.

“We are not licensed financial advisers so we can’t advise clients on what to do with their SMSFs and other assets, where to invest the money when they sell the business or on insurance to protect their assets,” he says.

“There’s a whole stack of areas that are specifically financial planner-related that experts such as me, accountants and others can’t do.”

He adds that baby boomers have typically been in business for 30 or even 40 years and may own buildings or similar valuable assets.

“When the time comes to unwind these ahead of retirement, there’s a lot of work to do and much of that needs to be done by a financial adviser,” he says.

West says many financial advisers already have clients who are business owners and have the confidence, skills and materials to discuss their succession planning with them. Those in this position will also attract new clients who are business owners.

According to West, succession planning requires a multidisciplinary collaborative approach. “A succession plan can’t be done alone by me, an accountant, financial planner, tax expert, lawyer or banker, but all of these people can be involved,” he says.

“A financial planner has an advantage because in most cases, the exiting owners are planning to retire. Retirement planning, transition to retirement and self-managed super are a big part of the plan.”

West adds that it’s a good strategy for planners to create a good team of collaborating experts that they can trust because they can also generate business from the clients of the other experts in their network – a win-win for all.

Not for everyone

However, KMT Partners co-founder Michael Fox warns that succession planning is far more than a financial plan and can be challenging for many financial planners.

He says it also has to do with human nature, families and family dynamics. “You will occasionally even need to bring in psychological help to deal with the fights between children that don’t want to cooperate with each other,” he says.

Fox cautions that financial planners must also be able to collaborate with other specialist practitioners and have relevant experience.

Dealing with SMSFs, their limited recourse borrowing arrangements, trust and company structures and corporations and trust law can be very complex for many planners that have focused on the retail side of the market, he says.

“For your own safety, it’s important to your competencies and when you’re going to need outside advice to help your clients get what they need,” Fox says.

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