succession-planning / treety

This article appears in the June 2023 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

Financial advisors interviewed for Investment Executive’s (IE) 2023 Brokerage Report Card are aware that business succession planning is crucial for the industry.

The age of the average advisor in the Report Card has stubbornly remained about 51 for the past five years, and brokerage advisors’ books have continued to grow (to $265.3 million in investment assets under management in 2023 from $176.7 million in 2019).

An advisor with CIBC Wood Gundy in Ontario said that it’s not wise to “ignore the aging population of advisors. Succession and transition should be a top issue for all firms,” the advisor said, adding that it’s also important for clients.

“A lot of senior advisors aren’t pulling the trigger on the succession program. [I’m] not sure why,” said an advisor with Richardson Wealth Ltd. in Ontario.

According to Brokerage Report Card data from the past five years, the percentage of advisors who reported having a documented succession plan has increased markedly, to 44.2% of those interviewed in 2023 from only 28.9% in 2019. (See “Who’s planning, and who’s not”) However, the segment of advisors who had a plan this year was notably lower than last year’s result of 57.4%.

In this year’s Report Card, advisors with a plan stressed the importance of having one.

“It’s part of my job to do good planning. It is also out of respect for my clients,” said an advisor with iA Private Wealth in Quebec.

Another advisor in Quebec, with RBC Dominion Securities Inc., said, “Anyone can die. If something happens to me tomorrow, I need a plan.”

Another driver of the rise in succession planning in recent years may be firms’ growing efforts to educate advisors, such as distributing resources and encouraging the conversation.

“[My firm is] able to customize [planning] to the individual and the individual team. They have accommodated various succession plans and they do it well,” said an advisor with Raymond James Ltd. in British Columbia. (The brokerage was rated 8.8 for its “succession program,” up from 8.6 a year ago and consistent with the category’s 2023 performance average.)

“I’m too young [to craft a succession plan], but they have been talking about it lately and my manager asked me in my last annual review,” said an advisor with BMO Nesbitt Burns Inc. in B.C. That advisor added that they would appreciate continued guidance on how to write up a plan. (An insufficient number of Nesbitt Burns advisors responded to this category for the bank-owned brokerage to receive a rating.)

Among the 56% of advisors who hadn’t yet chosen successors, many said that they either had an informal plan or had started to think about it, but weren’t sure of next steps. They cited issues such as a perceived lack of a structured program and inadequate assistance from their firms.

“They do provide some templates [but] they don’t provide [much] support in terms of trying to create succession plans within the business, and I think they could work on this with advisors who are 50 [and older],” said an advisor with iA Private Wealth in Ontario. iA was rated 8.0 for its succession program, up from 7.3 in 2022 but below this year’s category performance average of 8.8.

“It’s [on] my mind,” said an advisor with TD Wealth Private Investment Advice in Alberta. “How can I find someone?” (TD Wealth PIA was rated 8.4 for its succession program, up from 8.1 in 2022 but also below the category’s performance average.)

At iA Private Wealth, branch managers and advisors are encouraged to think about not only succession planning but also catastrophe planning, said Stacie Fisher, the firm’s regional vice-president, Ontario. “Advisors [tend to say], ‘I’m not retiring. I’m going to be here for another 10, 15, 20 years.’ Well, there’s catastrophe planning that needs to be considered and we really want to make sure that your clients are protected, your business is protected, your staff are protected and your beneficiaries are protected.”

TD Wealth PIA has been promoting succession planning at roadshows over the past 12 months, said Craig Meeds, head of investment management practices and insurance, TD Wealth. For those seeking guidance, he said, “We’re here to help you build a succession plan, whether you’re 30, 40, 50 or 60 years old. [It will] not only take care of you and your business, but take care of you and your business in the context of your entire family.”

Some advisors are more focused on book growth than succession, or insist they’re too young to develop a succession plan.

“I think about [succession], but I haven’t made enough money to retire,” said an advisor with National Bank Financial Inc. in Alberta. This advisor added that a “substantial rookie program” to help them find a successor is on their wish list.

“I’m not going anywhere for at least another 15 years,” said an advisor with ScotiaMcLeod Inc. in Ontario. “There are a number of potential succession plans that I will have more clarity on in a couple of years.”

Who’s planning, and who’s not

Investment Executive asked whether advisors had a documented succession plan in place.

Among those who said yes (44%, or 278 out of 629 respondents):

  • average age was 53.0
  • average investment assets under management (AUM) as of Dec. 31, 2022 was $321.2 million
  • 70.3% were on a team with other advisors

Reasons for planning included retiring in the next 10 years, and that planning helps protect colleagues, clients and advisors’ families.

Among those who said no (56%, or 351 out of 629 respondents):

  • average age was 49.6
  • average investment AUM was $220.3 million
  • 42.4% were on a team of advisors

Reasons for not planning included being too young, their status as another person’s successor, or their plan was still a work in progress.