Navigating business succession with clients

As many advisers prepare for retirement, business advisory firm Business Health has said that advisers need to be taking a proactive approach to internal succession planning discussions with clients.

According to The Hidden Value report by CFS 10x released in August, some 34 per cent of advice business owners plan on exiting the profession in the next five years, and while discussions around succession planning for the business have been prevalent of late, it is also important for advisers to consider how to approach this with clients.

Namely, a Business Health post said it is critical that advisers are openly communicating their potential retirement plans with clients and ensuring that they are raising these discussions with clients, rather than the other way around.

This is because, according to the firm, if their adviser is approaching retirement, clients may become unsure as to their future with the firm, causing them to make assumptions that may trigger undue stress.

Regardless of whether the adviser is considering retirement, selling their practice, and even if nothing is changing, the firm said that advisers should be keeping open lines of communication with clients to keep them informed on what, if anything, might change in the near future.

The aforementioned CFS research also found firms that relied too heavily on an individual could see their business receive a lower valuation due to the key person dependency risk, as there was the potential for clients to go elsewhere if their preferred adviser left or retired.

Given the inherent value of strong interpersonal relationships between advisers and their clients, the firm said it is best that advisers are the ones to raise this discussion proactively. 

“It’s been our experience that the most successful firms address this issue before it’s actually raised by their clients. They get ahead of this curve ball by proactively presenting their future plans. While there’s no need for specific detail, by outlining your longer-term commitment and direction (staying or going) you will be going a long way to addressing any concerns clients might have,” it said.

When approaching these conversations, the firm explained that advisers would ideally do so one-on-one with clients, likely during their annual review meetings. Alternatively, practices that host seminars or end-of-year updates for clients may also choose to share future internal plans at such events.

With the Financial Advice Association Australia predicting a loss of around 1,000 advisers at the end of the year due to the education deadline on 1 January 2026, pre-empting discussions with clients will likely become more necessary, even if it is only to reassure them that their adviser will be remaining.