Modern Succession Planning: Less Transactional, More Emotional IQ

While financial planning has seen a significant influx of artificial intelligence in recent years, experts say the profession is still largely a human-centered practice.

“This is a people-helping-people industry,” wrote Julie Genjac, vice president and managing director of applied insights at Hartford Funds, in an email to PLANADVISER.

As firms continue to implement AI for efficiency, advisers say next-generation successors will need to stay focused on the human elements of the business. Succession planners are looking to strengthen mentorship and transition strategies to meet the needs of increasingly innovative firms.

“This business has always been a mentor-based business,” says Mike Goss, chief revenue officer at Wealthspire.

Succession as a Multi-Year Mindset

Historically, succession planning has often been viewed as “transactional”—simply handing off books of business and reassigning clients. Genjac says that approach no longer meets the needs of modern firms, and she encourages advisers to instead think beyond a single moment of succession and adopt an “intentional, multi-year transition mindset.”

At Hub Retirement and Private Wealth, Chief Operating Officer Greg Koleno says he puts this philosophy into practice, particularly when managing client transitions to incoming advisers.

“When we talk about succession planning for key leaders, whether those are advisers or others in the company, we want … ideally a two-year runway,” Koleno says. “A lot of that is because the business is becoming more experience-based and less transaction-based.”

Koleno says treating succession as an event, rather than a process, is one of the most common mistakes firms make today.

“The first mistake is definitely approaching succession planning as a transaction, rather than a competency-and-capability transition for the client,” Koleno says. “The second … is that succession plans really need to be stress-tested against the operating model you’re going to have in five years, not the one you have today.”

Goss says another major misstep firms make is failing to trust and empower younger advisers in the organizations.

“We tell our young, next-gen advisers all the time, ‘Just because we’re doing it this way doesn’t mean it’s right,’” Goss says. “We want next-gen[s] to constantly be helping us improve processes.”

When Breanna Seech, a director and senior wealth adviser at Mariner Wealth Advisors,  was a new adviser looking to build a business, she experienced effective forms of mentorship that helped her get to where she is today.

Now, as Seech helps bring younger advisers to Mariner, she prefers “old school” mentoring, which she explains is an active approach. Younger advisers sit in on meetings and absorb information or speak to prospective clients, while also learning how Mariner advisers use technologies and how individual advisers can use them differently for their specific needs and preferences.

Seech says firms commonly pair up younger advisers with next-generation mentors, which she finds “a little bit short-sighted.”

“If you really want to keep good talent, you have to give them the opportunity to work on an advanced client situation,” Seech says. “I also think it is sort of narrowing that exposure.”

Koleno wants a similar balance, like Seech.

“When we look at succession planning, it’s less about who we have in the seat right now and more about making sure that as we evolve and choose a successor, that individual has the capabilities and understanding … to navigate a broad range of demographics, but also the ability and the acuity to advance the business model and work within an ensemble team structure,” Koleno says.

The Need for High Emotional IQ

When asked what important skills incoming successors need to prioritize, Koleno says “emotional IQ and the ability to work with demographics ranging from Millennials through Baby Boomers—that’s becoming a truly unique skill set for individuals in this space.”

Goss agrees, as he emphasizes the long-time role human relationships have played in the practice of financial advising.

“Even though AI is kind of taking over, advisers will need to stay more human-focused to stand out in the next generation,” Goss says. “If I had to pick an adviser who was adept at learning software versus one who quickly relates to people and understands their needs … I would pick the high emotional IQ.”

However, Goss also emphasizes that firms should remain up to speed on the latest technological developments to remain competitive.

“Firms that are not adapting quick enough, that are not investing, not changing … the job profile or job description of advisers as this world changes quickly will be left behind,” Goss says.

Yet even as AI takes over more of advisers’ tasks, Koleno underscores the need for human judgment.

“I can use AI to make me more productive, … to build workflows, distribute services and do all the things that drive efficiency, productivity and task automation,” Koleno says. “But someone still needs to be there … to decide what is most relevant for that particular client.”