succession planning
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This article appears in the May 2021 issue of Investment ExecutiveSubscribe to the print edition, read the digital edition or read the articles online.

All financial advisors will inevitably stop working, yet findings from Investment Executive’s 2021 Brokerage Report Card show that most are in no rush to make an exit.

This year, respondents’ average book value rose by nearly $10 million to $209 million. As book sizes matured, so did advisors. This year’s respondents were 50.6 years old on average, slightly older than last year’s 50.4.

Despite being older and having larger books of business, the majority (62.7%) of advisors in this year’s Report Card said they didn’t have a documented succession plan. This finding represents a step back from last year, when 59.5% of respondents said they hadn’t crafted a plan — although it’s an improvement from 2019, when 71.1% of advisors reported not having a plan.

The average performance rating for the “Succession program” category was 8.6 this year, significantly higher than last year’s 8.0. The category’s importance rating was 8.9, compared with 8.8 a year earlier, leading to a much slimmer satisfaction gap (the amount by which the importance of a category exceeds its performance) of 0.3 for 2021.

While fewer advisors created succession plans this year, those who have plans were impressed with their firms’ support. The vast majority (93%) said their firms offered some form of succession program, higher than last year’s 87.7%.

Stacie Fisher, regional vice-president, sales, with iA Private Wealth (formerly Industrial Alliance Securities Inc.), said her firm is focused on ensuring advisors understand the “different layers” of succession planning. She said iA Private Wealth’s “multi-faceted” program offers sessions on “succession planning, catastrophe planning and business continuity.”

iA and Canaccord Genuity Wealth Management (Canada) saw the largest rating increases for their succession programs (7.7 for iA, up from 5.9 a year ago, and 7.8 for Canaccord, up from 6.8).

“They don’t get in the way [of succession planning], which is so much better than on the bank side,” said an iA Private Wealth advisor in Ontario. “We set up the value [of our business] ahead of time and select who to sell to. It’s really well done, since we can sell outside the firm.”

“The entire process was very smooth for me,” said a Canaccord advisor in Quebec. “If I had issues, they were sorted out quickly.”

Stuart Raftus, president of Canaccord, said the firm’s succession program allows advisors flexibility. “We have a template for them to use or to look toward, but they can customize it,” he said.

Wellington-Altus Private Wealth Inc. had the highest rating (9.9) in the succession category, up significantly from 9.3 last year.

“[The succession program has] got all the hallmarks of what you would want as an advisor who’s looking to retire,” said a Wellington-Altus advisor in Alberta. “It’s got flexibility and support from the firm.”

Edward Jones had a rating of 9.5, unchanged from 2020. The firm continues to offer a retirement transition plan that helps takes care of the paperwork and legal agreements for both the retiring advisor and the successor, said David Gunn, president, Edward Jones.

Edward Jones is “very supportive” of succession planning, an advisor in B.C. said. “I was able to give 80 clients over to a younger advisor who might better suit them — more of an evolution than a succession.”

Still, only 37.3% of all respondents to this year’s survey said they had a formal succession plan in place. Many said they were too young to formalize a plan.

Others simply weren’t interested in retiring. “Why retire?” said an advisor with RBC Dominion Securities Inc. in Ontario. “If I do during Covid, I’m stuck at home.”

Only 27% of advisors who said they’re not on a team also said they don’t have a formal succession plan. Meanwhile, advisors who said they were on a team — 48% on average, down from 52% in 2020 — said they appreciate the ease a team model offers when it comes to retirement. Advisors on teams also seemed more aware of the need for succession planning, with 48% of them having formal plans.

“We’re in a transition year since our senior partner is retiring, and it’s been a really easy process,” said an advisor in B.C. with TD Wealth Private Investment Advice, which received a succession program rating of 8.2, up from 7.7 a year ago.

Craig Meeds, head of private investment advice with TD Wealth PIA, said the firm officially linked its succession and advisor teaming programs in 2017, and that it has “put a lot more resources and energy into our succession program” over the past few years.