The life insurance industry needs to do a better job of helping financial advisors with succession planning or it risks suffering a significant and rapid decline in its sales force, according to Roland Chan, founder and CEO of Find BoB Ltd., who spoke at the Independent Financial Brokers of Canada (IFB) fall summit in Toronto on Tuesday.
“Our industry is headed toward the perfect storm,” Chan said, noting that the average independent advisor in Canada is 59 years old and that a majority of advisors have not yet put a succession plan or continuity plan into place.
Specifically, 80% of advisors do not have a written succession plan and 75% do not have a plan for the continuity of their business in the event of death or disability, according to research conducted by Find BoB, which is an online marketplace on which advisors can connect with other advisors looking to buy or sell a practice or find a succession partner.
“Death or disability is the No. 1 threat to single-owner practices,” Chan said.
The top reasons that advisors cite for not having a succession plan in place, according to Chan, include: not wanting to retire; the impression that valuations are too low; the impression that the succession planning process is too daunting; and difficulty finding an adequate successor.
Despite these hurdles, 90% of the advisors surveyed said they feel that they have an ethical obligation to their clients to create a succession plan, according to Chan.
“There’s clearly a conflict between how [many advisors] have a plan, which is less than 19%, and how many should be planning, which is 100%,” he said.
Firms need to step up and help advisors, Chan said. In fact, of the advisors that Find BoB surveyed, 55% said they ideally would like to find a transition partner within their own firm, yet more than half advisors said their firm didn’t offer the necessary support to do so.
Adding to the problem, Chan said, is the lack of new advisors coming into the business.
“We’ve done a poor job, as an industry, of grooming the next generation of talent,” he said.
Of the new advisors joining the industry, only one out of every 10 stay in the business for more than four years, he added.
“We need to orchestrate change,” Chan said, “and start cultivating the next generation of advisors.”
Photo copyright: jgroup/123RF