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The Clock is Ticking: Succession Planning for Advisors

By Ray Sclafani | February 17, 2016

Let’s start with a few irrefutable facts. Today, the average age of financial advisors in this country stands at 50.9 years old. According to Cerulli Associates, over the next ten years the transition of advisors into retirement will be unprecedented – involving 35% of wirehouse advisors, 25% of independent broker-dealer advisors and 30% of RIAs. A decade from now, more than one out of every four of you will have left the business.

The question is…what will happen to all those clients? Who will provide a continuity of care?

It may sound a bit “old-fashioned,” but I believe that this is a supremely noble profession. And deep down, I’m confident that most of you share that sentiment. Every time I stand in front of an audience of advisors and ask, “How many of you believe there’s nobility in the work you do? In helping families build and protect their wealth, create a legacy, and positively impact the communities they live in?” everyone is quick to raise their hands and nod in agreement.

If only most financial advisors were as eager to embrace a plan to ensure the continuity of client care as they are to embrace the mantle of nobility – to more honestly align the reality of their actions to their image as protector of clients’ best interests.

how to put a succession plan in place

My favorite chapter in You've Been Framed is Chapter 4, The Big Fat Lie, in that chapter there's a case study entitled “Sunbathing in Florida at the Client’s Expense.” It’s about a 62 year-old advisor with 35 years of industry experience (the last 25 years sent building and running his own practice). With 100+ clients, $150MM in AUM and $1.4MM in annual production, by almost any standard his firm is a clear success. His clients love him. He’s reliable, personable, and has always put their needs first. Early on, he told them he’d be there for them through life’s transitions, and he’s kept his word – helping put kids through college and dealing with illnesses and deaths of spouses and parents.

But now at 62, he’s winding down and starting to disengage professionally. He’s far more interested in laying on the beach in Boca than poring over portfolio performance reports. And to add insult to injury, he’s a sole practitioner with a single sales assistant who’s been with him since Day 1. So not only is he beginning to disengage, his assistant is also thinking about retirement.

Yet he’s still getting paid the same as if he were sitting in his office and diligently working full-time. Just how honest is he really being, both with himself and his clients, about his ability to serve their best interests? It’s a true life story that’s playing out time and again all across the country, because most of you still don’t have a plan to ensure continuity of client care beyond your working life.

Somewhere along the way, you’ve probably been asked by a client “If something ever happened to you, who should I talk to? Who will help me?” Even if they haven’t asked, you owe it to them to have a plan in place – and not just a written succession document. That’s the easy part. The hard part is the relation piece…the transfer of trust.

Studies show it takes 5 to 10 years to genuinely transfer trust between a client and a new advisor. Combine that with an average advisor age of 51, and clearly the clock is ticking! You can take the path of least resistance and simply stick your head in the Boca sand, claiming nobility but leaving your clients to fend for themselves when something happens to you. You can find a younger advisor in town to sell the business to, and check out with your integrity intact. Or you can commit to bringing a NextGen advisor onto your team NOW – honing your skills as a developer of talent, and introducing them into client relationships to begin sowing the seeds for a lasting transfer of trust.

Will you just rust at your desk or will you choose to rise up, take action and thoughtfully create a plan for the continued care of your clients? It’s time to decide.

Succession Planning for Financial Advisors


Coaching Questions from this article:

  1. What steps have you taken to ensure the sustainability of your business and the continuity of client care?
  2. How will you go about engaging a NextGen advisor to ensure the future well-being of your clients?
  3. What actions can you take to integrate that individual and begin to facilitate a transfer of trust?

Topics: Team Development Succession Planning

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