With their wealth on the line and deep bonds formed, many Canadians who work with a financial advisor are concerned about their advisor’s retirement plans, according to new research commissioned by Investment Planning Counsel (IPC).
The study involved an online survey of 361 independent financial advisors and a separate online survey of 1,545 adult Canadians, fielded this April and May, respectively.
It found that while most Canadians expect financial advisors nearing retirement to have a succession plan, 83% of those who work with an advisor are worried about it.
More than half of respondents (53%) are concerned their advisor wouldn’t give them advanced notice before retiring. Other worries include that a new advisor won’t protect their finances (43%) and that they won’t trust the new advisor (38%).
“[Clients] want to make sure that the financial legacy of what they’ve built is not only transitioned, but protected, and protected with a great continuity of advice,” said John Novachis, executive vice-president, advisor growth and succession at IPC in Toronto.
Be transparent
Clients are especially interested in their advisors’ succession plans because of the sheer amount of wealth they have on the line, Novachis noted. He said it’s estimated that independent advisors in Canada who have either reached or are about to reach retirement age collectively manage some $400–$500 billion in client assets.
Nevin Chernick, a senior portfolio manager, senior investment advisor and branch manager with Richardson Wealth in Vancouver, who’s well advanced in his succession planning, recommends advisors be upfront about their succession plans.
“It’s really important to have some degree of transparency with clients” so they know what to expect in a succession plan and can grow comfortable with it, said Chernick, who was not involved with the IPC study. Otherwise, succeeding advisors and/or their successors are at risk of losing clients.
Technological advancements that have made building and reviewing financial plans more mechanical have freed up advisors’ time, Novachis said, allowing for more in-depth conversations with clients about topics such as retirement in annual review meetings. That could open opportunities for a conversation about the advisor’s retirement plans.
The survey also revealed that while only 19% of advisors have a completed, detailed succession plan in place, a further 65% have started a plan or had a rough idea of their approach. That combined 84% was higher than a combined 64% in IPC’s 2021 study of 358 financial advisors, indicating some progress in the industry.
Research by Investment Executive (IE) found a smaller gap between advisors who have succession plans and those who have just thought about them.
According to data from IE’s 2024 Brokerage Report Card and 2024 Dealers’ Report Card, 46% of 1,074 advisors surveyed had documented business succession plans last year. Another 20–23% said they had begun planning a succession as either a retiring or succeeding advisor, but some of those advisors said they lacked resources, guidance and/or advisor connections.
Putting it off
The IPC study highlighted reasons advisors are putting off finalizing their plans.
Eighty per cent of advisors said they’re hesitant about succession planning. Those who expressed hesitations said they aren’t sure who to trust to be their successor (27%), are sad about losing client connections (26%) and are uncomfortable about their career ending (25%).
Advisors who are hesitant about succession planning are also more likely to note they were too young to start (46%) and concerned it would be overly complicated (19%).
Also, nearly one in five financial advisors said they’re delaying retirement due to market volatility and the current state of the economy.
Novachis attributed this finding to two possible factors: these advisors either wanted to help their clients weather the storm of the volatile markets, or they were concerned about business valuation.
He added that it’s possible these advisors are looking to sell their businesses when they’ll get a better return on their investment.
Environics Research conducted the online survey of 361 independent financial advisors, which was fielded between April 21 and 26.The survey reflects the views of advisors from a cross section of all the leading investment dealers in Canada, including the major bank brokerages and independent wealth management firms.
Pollara Strategic Insights conducted the online survey of 1,545 adult Canadians between May 15 and 21. Results from a random sample of this size have a margin of error of plus or minus 2.5%, 19 times out of 20. The results were weighted by gender, age and region, using the latest census data, to be representative of the Canadian population.