A year ago this month, Advisor Group asked the planners affiliated with its network of independent broker-dealers if they had documented succession plans. The results from the 744 who responded weren’t particularly unusual, but that’s what made them disheartening. Almost 82% of the survey respondents said no, they hadn’t created a plan. The reason? More than half said they “couldn’t find the right person,” according to the survey.
“Unlike a lot of businesses where you just sell to the highest bidder, these businesses are built on human relationships,” Advisor Group CEO Jamie Price told me during a visit to Financial Planning’s New York offices last month. “These advisers are really emotional about it. It’s not like selling a widgets factory.”
So the firm took matters into its own hands. It began pouring resources into a succession planning department. Last year alone, Price tells me, the department facilitated about 100 internal transition plans.
The advisers who received that help are the lucky ones. Countless firm founders are still paralyzed when it comes to appointing an heir apparent. They’re even stuck on what kind of succession they’d like to see, whether it be an internal transition or a merger with another firm. The indecision has far reaching ramifications. Among them, clients may refrain from referrals if they don’t have a clear sense of who will handle accounts when their adviser retires, FP Senior Editor Ann Marsh tells me.
Marsh, who wrote this month’s feature, “Solving Succession,” said she was surprised when a source told her that firm founders should already be thinking about their last day on their first day.
Sure, that’s a tall order. Fortunately, no matter where advisers are in their career, it’s never too late to start planning, Marsh says.
“Many firms put into place stopgap solutions with key man or other insurance policies,” Marsh tells me. During her reporting, Marsh spoke with several firms that have been relying on these strategies until their internal succession plans are fully operational. “That can be the right way to go until you sort your strategy out,” she says. Among other approaches, “hire a succession consultant or enroll in a custodian’s transition program to put the mechanics of succession in place.”
Whatever you do, she says, “get started.”
Article published by Financial Planning May 1 2017
Written by Chelsea Emery