Is your junior advisor ready to take the lead?

If you had to think of one person to take over your business when you retire, there’s a good chance your junior advisor will come to mind. After all, they already know your clients, have a good rapport with staff and understand your approach to planning. You may have even brought this person on with the hopes that they will one day take over.

But while they may seem like the obvious choice, are they the right successor for you?

Managing client portfolios and providing financial advice is one thing. Navigating a business-related crisis, keeping a team motivated through tough markets or looking a longtime client in the eye when something goes wrong are entirely different.

As you prepare your succession plan, here’s what to consider when thinking about whether to pass the torch to your junior advisor.

Internal succession can feel right

Succession from within often feels like the best option. The person is someone you already trust and they’ve learned the business. They’re familiar with your workflows and have watched you handle challenging situations.

The succession process is often viewed as a natural progression with less potential for disruption, which is exactly what clients and staff want to see. But familiarity alone doesn’t guarantee they’re ready to lead. The best way to find out if someone has what it takes is to let them run the business without you for a while.

Take a month-long vacation and see how they respond. Do they take more accountability and make thoughtful decisions? Or are they calling you with questions they should have answers to? Ideally, you want to see your junior advisor demonstrate a higher level of commitment, while remaining calm under pressure and holding the team accountable.

Common challenges

An internal succession can present challenges.

Junior advisors often struggle to secure the necessary financing to purchase the business at its fair value. These are expensive ventures that come with multi-million-dollar price tags, which can be challenging for a young advisor to afford.

Traditional bank financing is often difficult to obtain in these situations, which makes the transition even more challenging. Financial institutions tend to be wary of providing loans to businesses that have few physical assets, and there’s always a risk that clients may leave after the sale. Junior advisors often lack the personal assets or long-term business history that banks typically require before underwriting a loan. In those cases, funding must come from private lenders, family backing or other creative solutions.

Securing money is only part of the challenge. The next question you need to resolve is what you’re willing to do to accommodate the transfer. To make a deal work with a junior advisor, you may have to get creative, extending payouts over a longer period.

If you do have to wait to get paid, there is a risk that the junior advisor will walk away if things don’t work out the way they had hoped. They may also simply change their mind about buying the business, which could damage the practice and force you to retake control.

For an internal succession to really work, you and your successor must share the financial load. That typically means having the junior advisor put down at least 25%–35% upfront — enough to show they’re serious.

This kind of structure helps ensure everyone’s committed. You want your successor to have real equity at stake, while you’re still connected to the outcome. It won’t eliminate every risk, but it makes walking away costly for both sides.

Consider your options

No matter how much you might respect your junior advisor, plans don’t always work out. Even if you brought one on for the purpose of eventually taking over the business, they could decide that they would rather be in front of clients than worrying about running a business. You will need a backup option to help make sure you can carry out your succession plan, and preserve your company’s value if circumstances change.

At the same time, it’s worth seeing if there may be other options that suit your needs better. Consider selling to another advisor or a strategic buyer, which could include a larger company, an aggregator or a private equity-backed firm.

Ultimately, a smooth transition isn’t only about picking someone you like. It’s about finding a buyer who can properly care for your clients, build on what you’ve established and provide the kind of exit you need to transition into the next phase of your life.

For some, that will mean selling to a colleague who knows the business inside and out. For others, a different choice may be more appropriate. Do your due diligence. Do what’s best for you and your business.