Successful succession planning tips

Making a succession relationship work is tricky, but it worked out for Ebrahim Moola CA(SA), CFA, a Financial Advisor and Investment Professional at Bobats and Sterling Invest. He shares succession planning tips to help the incoming and outgoing advisor achieve a successful relationship.

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I believe succession planning for any business is like a marriage of sorts between the incoming and outgoing advisor. Before anything happens, you need to “date” to determine if there’s chemistry and if you can both see a long-term future together. Once you engage, both parties need to be willing and able to accept change, compromise and remain flexible. This is the story of my journey into the IFA industry and how I bought into the Bobats business.

After spending a few years in the institutional investments industry in Cape Town, I decided to return home to Durban in 2015 to set up my own financial planning and investments business, Sterling Invest. The target market – affluent medical professionals (I come from a family of doctors). While I felt like I had the technical expertise to succeed, I did not have many clients. So, I muddled somewhat quietly through my first year back in Durban, building my network within the IFA and service provider circles, trying to understand how things worked. Through this networking, I was introduced to Hoosen Bobat.

Bobat was closing in on retirement age and was looking for a successor for his family’s long-standing financial services business, Bobats. The business was established by Bobat’s grandfather in 1930 (yes, over 90 years ago) to service the insurance needs of Indian merchants operating in central Durban. Over the past 20 years, it morphed (with the needs of its client base) into a financial advisory and investments business that serves affluent professionals and businesspeople around South Africa.

Ebrahim Moola - Bobats and Sterling Invest
Ebrahim Moola CA(SA), CFA, is a Financial Advisor and Investment Professional at Bobats and Sterling Invest.

Bobat and I hit it off when we met, and we quickly built up an open and cordial relationship. We realised that us combining forces would create synergy and mutual benefit: he gets more free time and a suitable successor for his business and family legacy, I get access to his loyal client base that I can use as the foundation to build my business on.

He offered me a six-month, salaried, probationary role to allow us further time to determine if there was a strategic fit. When we decided there was, it took us another six months to iron out the financial details and the approach we would take for the impending five-year succession plan.

Fast forward to 2021, by most metrics, the succession plan has worked out brilliantly for both parties. I’ve built on the solid foundation to set up Bobats and Sterling Invest for long-term success: our clients are happier (I think), AUM has grown handsomely, we’ve relocated our offices to a leafier part of town, grown our staff complement to 13 people and improved systems and processes. Bobat got what he wanted too: the knowledge that the family’s legacy and its long-standing clients were in safe hands, a fair pay-out for his shareholding in the business, substantially reduced operational responsibilities and loads more free time to spend with his grandkids and for fishing.

It has to be a win-win situation for both parties.

I believe the tips below will go a long way in helping others find the right match and making a succession relationship work.

Tips for both parties

  • It has to be a win-win situation for both parties. There needs to be a happy meeting of minds and a well-defined understanding of the end outcomes both parties are looking to achieve by doing a deal.
  • Don’t be afraid to spend extra time going through the “fluffy stuff” upfront. I believe articulating and agreeing on the culture, value proposition and vision of the business is super-important in the pre-agreement phase.
  • Get an independent and professional valuer to assist you with structuring the financial parts of the succession (valuation, payment arrangements, agreements, etc).
  • All good things take time. Both parties should not rush into finalising the agreement for the sake of moving forward quickly.
  • The longer the handover period, the better. This provides the incoming advisor with time to learn the ropes and, more importantly, the opportunity to build rapport with key clients and service providers.
  • Accept that things will not go 100% according to the plan. Both parties need to be flexible and willing to adapt when encountering the inevitable curveballs that come your way.
  • Continue to nurture and respect the relationship between the two parties. Touch base regularly to ensure things are moving in the right direction. To this day, Bobat and I still have an amicable and friendly relationship.

Articulating and agreeing on the culture, value proposition and vision of the business is super-important in the pre-agreement phase.

Tips for the incoming advisor

  • At the beginning, recognise that you are only seeing the tip of the iceberg of work and relationship building that went into bringing the business to this point.
  • Spend the probationary period trying to comprehend why things operate the way they do before making any changes. Come into the business with a notepad, not a wrecking ball.

Tips for the outgoing advisor

  • In advance, make a candid disclosure of the impending succession (and rationale) to the key staff and big clients of the business. Before anything else happens, you need their buy-in to ensure the succession plan can commence.
  • Allow the incoming advisor (who is usually younger and not in a strong financial position) to pay for his/her shareholding in the business in instalments, ideally based on the achievement of certain milestones within the business.
  • Accept that you are no longer the final decision-maker of the business and gradually allow the incoming advisor to take control of decision-making and operations.

In hindsight, I must admit to a healthy dose of good fortune in my journey. I found myself in the right place, at the right time, with the right skills when I met Bobat. However, I can take some of the credit for putting myself in that position to become a successful successor.