Hits and Misses Been There, Done that Pro­duc­ers Share Lessons learned from Their Prac­tice Tran­si­tions

Insurance - - AGENCY - by Kathryn Furtaw Ke­uneke, CAE

Suc­ces­sion plan­ning is one of the big­gest topics in the in­dus­try to­day, yet it seems to be shrouded in mys­tery. When should pro­duc­ers be­gin to worry about this? How should it be done? While it’s such an im­por­tant is­sue, there seems to be a short­age of ad­vice from those who have suc­cess­fully done it.

The 2012 Busi­ness Con­tin­u­a­tion Task Force ac­cepted the chal­lenge and tracked down sev­eral MDRT mem­bers who made it through the process. They brought back their sto­ries to share the lessons th­ese in­di­vid­u­als have learned: what worked, what didn’t and what they wish they had known go­ing in. One of the most-rec­om­mended pieces of ad­vice? Start early. For the rest, read on.

Choose Your Suc­ces­sor Care­fully

James E. Rogers, CLU, CFP, 2008 MDRT Pres­i­dent and a 39-year mem­ber from Van­cou­ver, Bri­tish Columbia, Canada, spent his ca­reer build­ing a busi­ness of nearly 50 peo­ple, in­clud­ing 18 ad­vi­sors. When it came time to be­gin plan­ning his de­par­ture, he set­tled on two ad­vi­sors from within his prac­tice who would buy out his as­sets — one in cash and the other over a 10-year pe­riod. Rogers urges oth­ers to think care­fully about who they choose to take the reins.

His rec­om­men­da­tion is to choose — for the clients’ sake — some­one with a sim­i­lar style to your own. Rogers also sug­gests bow­ing out grace­fully so clients don’t feel aban­doned. He main­tained com­mu­ni­ca­tion with some of his clients for five years be­fore fully turn­ing them over to his suc­ces­sors. That

be­ing said, Rogers warns no mat­ter how wellex­e­cuted your plan, you will lose some clients, so it is best to ac­knowl­edge and ac­cept this re­al­ity. Af­ter sur­viv­ing can­cer, 27-year MDRT mem­ber Pa­tri­cia L. Krarup, MSFS, ChFC, of Janesville, Wis­con­sin, de­cided to put a value on her busi­ness for es­tate tax pur­poses. With this foun­da­tion set, she was well-po­si­tioned about 15 years later when she was ready to con­sider merg­ing with an­other ad­vi­sor who could even­tu­ally take over her prac­tice. Krarup found her match in an­other MDRT mem­ber — MDRT Sec­re­tary Brian D. Heck­ert, CLU, ChFC, of Nashville, Illi­nois — and the two re­cently en­tered into a three-year buy­out process. “The best de­ci­sion was choos­ing some­one I know and trust,” she said. “I al­most merged with some­one (else) twice, but just never really felt I could trust the per­son with my clients.”

Spec­ify the Seller’s Time­line

John J. Dem­boski, CFP, now an eight-year MDRT mem­ber, was brought into this pro­fes­sion sev­eral years ago by his men­tor, 40-year MDRT mem­ber James M. Chap­man, CFP. Two years ago, the two men from Santa Bar­bara, Cal­i­for­nia, com­pleted the suc­ces­sion plan­ning process, and Dem­boski pur­chased the prac­tice Chap­man founded in 1969. Eleven-year MDRT mem­ber Clay Gille­spie, CFP, CIM, of Van­cou­ver, Canada, one of the buy­ers of Rogers’ busi­ness, echoed the need for a tran­si­tion time for clients to ad­just to the new ad­vi­sor so they are not sub­ject to cul­ture shock. One of his big­gest take­aways for this tran­si­tion and oth­ers he’s been part of is to in­cen­tivise the seller to stay on­board through the tran­si­tion and for a spec­i­fied amount of time af­ter­ward. “It makes things go much more smoothly, and there is sub­stan­tially less risk of the deal fail­ing if the seller is present and in­volved,” Gille­spie said.

Seek Out­side Help

Dem­boski cred­its the de­ci­sion to stay flex­i­ble through­out the process as a big fac­tor in their tran­si­tion’s success. Part of stay­ing flex­i­ble, he said, was know­ing when to find and use pro­fes­sional third-party help. “The process can move from ra­tio­nal to emo­tional, and it was in­valu­able to have some­one fo­cused on the ul­ti­mate goal of get­ting this done,” Dem­boski said. “It’s easy to get frus­trated and get bogged down in de­tails while los­ing sight of the big pic­ture.”

Com­mit to the Process

With a cou­ple of false starts un­der his belt, Thomas E. Fowler, CLU, LUTCF, re­alises it takes a lot of time and con­sid­er­a­tion to de­velop a mean­ing­ful re­la­tion­ship and tran­si­tion your prac­tice, and there’s no way to short­cut the process. The 23-year MDRT mem­ber from Belle­vue, Washington, tried twice to men­tor a suc­ces­sor for his prac­tice, but nei­ther re­la­tion­ship worked out. He at­tributes this to the lack of mu­tual com­mit­ment on the part of the po­ten­tial suc­ces­sor, as well as not enough com­mit­ment on his part to the process. Specif­i­cally, he said, he wasn’t clear enough about how he wanted the process to go and what the ul­ti­mate re­sult should be.

Though he’s in­vested a lot of time al­ready with no suc­ces­sor cur­rently in place, he is com­mit­ted to find­ing the right per­son to bring in and de­velop, rather than putting his busi­ness up for sale. Now, hav­ing learned from failed ex­pe­ri­ences, he is think­ing even big­ger. Rather than sim­ply find­ing an even­tual suc­ces­sor, he is pre­pared to use this op­por­tu­nity to bring some­one in with dif­fer­ing ex­per­tise so they can help him ex­pand the busi­ness into new ar­eas. i

This ar­ti­cle was reprinted with per­mis­sion from the Mil­lion Dol­lar Round Ta­ble’s Round the Ta­ble mag­a­zine. For more in­for­ma­tion about MDRT mem­ber­ship, visit www.join­m­drt.org.

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