As the average age of advisors continues to climb, the need for advisors and their firms to embrace succession planning is becoming more pressing.
There’s a lot at stake in forgoing a succession plan. For advisors who said they were without a plan, the average book size at risk was nearly $180 million. That’s more than the $178 million held by advisors who did have a plan in place.
A whopping 71.1% of advisors in this year’s Brokerage Report Card said they didn’t have a documented succession plan – about the same as five years ago, when 71.3% of advisors didn’t have a plan.
With an overall importance rating of 8.7 for the category “firm’s succession program for advisors,” there’s no disputing that advisors think succession planning, and their firms’ support in this area, is critical. Most firms seem to agree: 89% of participants said their firms provide a formalized succession program.
The majority (56%) of those surveyed with documented succession plans were already on a team, meaning they likely had support. Of the respondents who didn’t report a transition plan, only 36% were on a team. The remaining 64% of advisors, then, wouldn’t have the built-in support of colleagues to help smooth the transition for their clients and their businesses.
Says an advisor with Toronto-based Richardson GMP Ltd. in Ontario, “It’s imperative that we transition our clients over time. Given my age [65+], it’s also very important.”
Yet many advisors seemed complacent about succession planning, either because they said they were too young to start exploring the topic (advisors who reported this were typically younger than 50) or because they hadn’t been informed about the options available.
A considerable number of advisors at Quebec City-based Industrial Alliance Securities Inc. (iA Securities) seemed particularly unsure about whether their firm offered a succession program, and what it might entail. That confusion may come from those advisors who had joined the firm as a result of acquisitions such as the 2017 purchase of HollisWealth Inc. from Bank of Nova Scotia.
“I don’t know under the new firm,” says an advisor in Ontario with iA Securities. “I assume they would honour the succession program from the previous firm.”
John Kelleway, president of iA Securities, confirmed in a statement emailed to Investment Executive (IE) that the firm supports all succession plans advisors have in place within the dealer. However, he adds, “It gets more complex if the succession plan is between advisors at different firms.”
Across all firms surveyed, advisors with succession plans said it was important for firms to give them influence over key decisions that will affect their books.
“I like how they set it up for me,” says an advisor in Ontario with Vancouver-based Canaccord Genuity Wealth Management (Canada). “I get to choose that it goes to my junior partner and I get to have input in the price and schedule of payments. That’s all I need.” Canaccord garnered a rating of 7.3 in the succession program category.
Advisors at Mississauga, Ont.- based Edward Jones also praised their firm’s program flexibility, giving it the highest rating (9.2) in this category. Leede Jones Gable Inc. and RBC Dominion Securities Inc. were next, each at 9.0.
“There is a really good, fluid system in place,” says an Edward Jones advisor in Ontario.
Ann Felske-Jackman, principal of financial advisor talent acquisition at Edward Jones, confirmed in a statement emailed to IE that the program is highly rated because retiring advisors have authority over how they want to pass on their books.
“The retiring advisor [has] the ability to choose a successor or multiple successors and will choose the length of the plan. They will then decide which successor serves each client, ensuring the best possible match,” she says. “When it comes to successor advisors, these individuals may have already been hired and trained by Edward Jones.”
She adds that if the retiring advisor has someone else in mind, an external successor can be hired.