How one retiring advisor built a flexible, phased succession plan 

A few decades ago, succession planning was seen as a simple task among financial advisors in Canada, Nevin Chernick recalls. A retiring advisor would find a successor to purchase their practice, they’d spend a bit of time introducing their clients to the new person and then they’d step away, leaving the new advisor to take on the challenge of retaining those clients.  

There are still some succession plans that are designed that way today. However, in recent years, the industry has placed more of a focus on starting the process earlier, thinking it through more carefully and allowing for an interim period where a new advisor is brought into the practice to foster trust with clients so that when the retiring advisor leaves, those clients are more likely to stick around.   

That’s precisely the approach Chernick, senior portfolio manager, senior investment advisor and branch manager with Richardson Wealth in Vancouver, is taking. It’s also the approach he recommends to other retiring advisors at the firm.  

“My goal was to start planning far enough in advance that when I am ready to step away, it will be a relatively seamless transition for our clients who are already familiar with the people that are going to be taking over the practice,” he said. 

“And so, my idea was, I want to find the person or persons who best fit the bill.”  

Here’s a glimpse into Chernick’s succession plan and tips he shared for other advisors planning to take the plunge.  

Where it all started 

Chernick initially hoped that an associate who had been working at his practice for eight years would eventually take the reins of  Chernick’s. But that associate left to work in his family’s real estate business.  

In 2017, he brought on another young, ambitious man who had a significant amount of portfolio management experience, with the possibility of succession in mind.  

This new associate expressed a strong interest in managing investment portfolios but less of an interest in networking and attracting new clients. Acknowledging this, the associate raised the idea of bringing another person into the practice, someone who exhibited this entrepreneurial spirit.  

Together, they decided on a young woman with financial planning expertise who was working in Richardson Wealth’s tax and estate planning group. They spent about a year formulating a plan for her to join their practice, and she was brought in officially last year, Chernick said.  

“I thought this was a perfect fit, because when you’re looking for partners to run a team, what tends to work, in my eyes, is two people who don’t duplicate each other, but rather two people who bring complementary skill sets to the team,” he said.  

“And so, I now have these two associate advisors, each with a very different set of skills, who ultimately will take over the practice.”  

A phased approach  

The three have taken interim steps to guarantee a smooth succession.  

First, Chernick wanted to confirm that his two associates were the right fit to carry on his legacy. Did they demonstrate a strong desire to be a successor? Check. Did they show a tremendous amount of care for clients? Check. Did their values align? Check.   

He also wanted to give his successors “prominent front and centre” roles so they could build a strong profile with clients as he gradually stepped back.  

Currently, the associate with portfolio management expertise handles annual review meetings with clients and provides market commentary in a monthly e-bulletin to demonstrate his depth of knowledge of the markets. Meanwhile, the associate with financial planning expertise goes through holistic financial planning processes with clients and is expanding the practice’s client base.  

“What’s critically important to me is I don’t want clients to think, ‘OK, the junior people are taking over. And how is this going to work? And is it going to work?’” Chernick said.  

“A lot of my bigger clients have been with me for over 20 years, so that’s certainly a blessing, but it’s also a little bit of a curse. … They’re used to dealing with me and now I need to get them comfortable with dealing with my successors.” 

As well, Chernick wanted to be transparent with his clients about his succession plan. This is important, he said, because it can help prevent clients from questioning what will happen when their advisors retire.  

“To the extent that you allow that to go on, I think you’re increasing the risk level that when you do ultimately choose a successor, your clients may not buy in,” he said.  

Chernick further considered how he wanted his succession plan to be structured. He said he worked with Richardson Wealth to develop a succession agreement without a rigid date for when he intends to retire.   

“What I’ve worked with the firm on is, let’s have the flexibility to say we don’t know when the actual date is going to be that Nevin’s going to actually step away, but here’s how we’re going to determine valuation once we know that date,” he explained.  

Chernick said this plan suited him because he doesn’t want to quit cold turkey.  

“As long as my health allows me to continue to be involved, I feel like I’d like to keep my mind active, I’d like to stay engaged, but in a lesser and lesser capacity,” he said.  

“I just think that that’s an ideal scenario, if you can make it happen.” 

Tips for advisors 

Advisors who are planning a succession need to be mindful of a few things. 

For one, they must manage everyone’s expectations — from their clients, to their successors, to their staff and their firm — about what the succession will entail, Chernick said. 

They also need to consider different succession plan structures and go with “what ultimately makes sense” for them, he suggested.  

In an internal succession plan, Chernick recommended advisors build the profile of their successor or successors among clients to instill confidence in the process.   

“You’ve got to create an understanding amongst your clients that it’s not a step back when you retire. They’re not going to suffer. Their portfolios aren’t going to suffer,” he said.  

Advisors who prefer to bring in a successor from outside of their firm should start thinking about who they may want to partner up with early and speak with their firm’s management or a branch manager, where possible, to express their desire to bring the individual into the firm to take over their practice, Chernick recommended.  

It’s also important to give forethought to how a succession plan is presented to clients, he said. 

“The sooner you start to envision how this is going to look, the better it’s likely to turn out.”