Achieving Business Continuity Through Succession Planning

Achieving Business Continuity Through Succession Planning

Business continuity has become as important a criterion as performance for consultants and institutional investors when evaluating and selecting an asset manager. Effective management of key-person risk through effective succession planning is essential to business continuity. Every firm – regardless of size – needs to plan for succession. The leading asset managers have well-defined succession plans for all key positions – CEO, CIO, portfolio managers, research analysts, operations and administration, client service, marketing and sales, and compliance.

The easiest successions are planned retirements. Merganser Capital Management, a Boston-based fixed income asset manager, is an excellent example of a firm that managed the retirements and successions of two founding partners seamlessly. Well in advance of the retirements, Merganser had defined the transition plans, and communicated them clearly and continually to their clients. The two founders were co-CIOs and portfolio managers. When the first founder decided to retire, the firm named a successor co-CIO and co-portfolio managers, and informed their clients of the planned retirement date at least two years in advance. The successors worked closely with the founding partners during the transition period and spent time getting to know all clients. Merganser implemented the same plan when the second founder decided to retire a few years later. Both transitions were smooth and successful, as evidenced by high client retention and continued growth of AUM.

Sudden unexpected departures are the most disruptive and can even mean the demise of a firm. Firms that have experienced the fire drill of unexpected significant changes when there is no clear plan in place know first-hand the stress, risks, costs, potential fallout and damage control entailed with such an event. The impact of such changes can be minimized by planning ahead.

Recommendations for Effective Succession Planning

Determine and Develop the Skill Sets Needed for All Key Positions in Your Firm

To build necessary bench strength, start by defining the skills sets needed for each role essential to business continuity. Regularly assess the strengths, skills and weaknesses of your current team. Provide the necessary development and support to build the knowledge and skill sets people need to be as effective as possible in their roles. Review and refine the profiles of each role on a regular basis in context of future needs. Introduction of new investment strategies and distribution channels, new regulations, a merger or acquisition, new systems and tools, and other organizational changes all impact the skills needed to manage and grow your business. Having a clear vision of your firm’s evolving needs is helpful in developing people for future leadership roles. You also need to determine where you have gaps in current skills or those that will be needed in the future, which will be beneficial in determining the attributes, expertise and skills of new hires.

Document Processes and Procedures for All Positions

Effective documentation of processes and procedures requires a collaborative effort between management and team members. Engage people in documenting their roles, responsibilities and procedures. Management review and discussion to refine the descriptions will ensure clear mutual understanding and expectations. In addition, good documentation helps on other levels:

  • Facilitates cross-training of current employees
  • Accelerates learning curve of new employees
  • Provides useful context for conducting professional and employee reviews

Review and update the processes and procedures periodically to ensure that they are complete, easy to understand and up-to-date.

Elicit Input from Team Members

Strong leaders also include their team members in the succession planning process. They elicit people’s perceptions of their colleagues’ individual strengths, weaknesses and areas for development. In addition to leaders gaining valuable insights to develop sound succession plans, the inclusionary approach helps to gain buy-in on the plan when the time comes to implement.

Communicate the Plan Internally and Externally

In all scenarios, transparent and regular communication with your internal team, as well as with clients, consultants and prospects about your succession plans is important. It is unnecessary to name specific successors in advance (which can cause internal friction). It is necessary, however, for senior management to know for which key roles there is a qualified successor in place and for which roles an outside candidate search would need to be initiated. In the latter case, an interim plan for the candidate search period needs to be defined. For example, the CIO or a team of portfolio managers would step in to cover the unexpected departure of a senior investment professional.

An asset management firm can have a strong succession plan in place, however, and still suffer significant negative impact with a departure. Introducing clients and consultants to as many team members as possible and generating confidence in their capabilities is also important. It helps to minimize surprises, manage expectations and build comfort around upcoming or possible changes, and to instill confidence when changes do occur.

One firm found out the hard way that perception versus reality can be detrimental. The CIO was the primary face for the firm, handling the majority of prospect presentations, and client and consultant meetings in the early years after the firm’s launch. The firm was successful, assets under management grew quickly to more than $30 billion, and they simultaneously built a strong investment team. The firm’s President and CIO initiated a training program to prepare team members to take a more visible external role. Before the training program was completed, the CIO left unexpectedly. Unfortunately, the clients’ and consultants’ lack of familiarity with and unwillingness to take the time to build confidence in the remaining team resulted in significant asset outflows.


Benefits of thoughtful succession planning that contribute to business continuity are:

  • Seamless transitions
  • Uninterrupted business operations and functions should a key professional leave, or be out for an extended period due to illness or injury
  • Enhanced employee retention through continual growth and advancement potential
  • Increased client retention

“Succession planning helps build the bench strength of an organization to ensure the long-term health, growth and stability.”
~ Teala Wilson

Charnley & Røstvold, Inc., a preeminent marketing consulting firm to asset management firms ranging in size from start-up firms to some of the world’s largest investment firms with over $1 trillion under management. Charnley & Røstvold helps clients with competitive positioning, marketing strategies, key messages, presentation refinements, communications and sales training, consultant relations and client service programs.

Christine Røstvold, co-founder of Charnley & Røstvold, Inc., is a popular industry speaker and author. Christine was a founding board member of PAICR (Professional Association for Investment Communications Resources), and served on the Advisory Board for more than a decade.


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