With many longtime advisors planning to leave the industry in the next five years, a new survey is finding some all-too-human reasons for why they aren't further along in their succession planning.
According to a survey of 233 advisors by Edward Jones and research firm Morning Consult, the top obstacles advisors must deal with when handing down a practice include:
- Anxieties over obtaining
a fair valuation of their practice , cited by 27% of the survey respondents - Their desire to find new owners they can trust, cited by 61%
- Reluctance to contend with the
complexities of succession planning , cited by 71% - A sense that succession is too far in the future to worry about now, cited by 25%
Despite such impediments, Edward Jones and Morning Consult's research found the need for succession planning in the industry remains pressing. According to the survey from July 14 to 18, nearly 60% of senior advisors in the survey — defined as those with 10 or more years of experience or who are within 10 years of retirement — say they plan to hand down their practices in the next five years. Yet only 42% of the respondents among all advisors have a fully documented and formally legal plan in place.
Like many firms, Edward Jones has various offerings meant to make succession planning easier for its advisors. They include transition and integration managers who can work with advisors seeking to hand down a practice and teaming options that allow advisors to work with others who may someday be able to take over the business.
"The numbers tell a story we hear from industry advisors every day: they know succession planning matters, but aren't doing enough about it," said Jason Henderson, principal and head of financial advisor recruiting at Edward Jones.
For other considerations on handing down a business, check out:
Planning for internal succession? Start earlier than you think
An internal succession can preserve a firm's culture and client relationships, but experts say a successful handoff may require a decade of developing future owners, transferring responsibilities and working through the economics.
See why succession planning may need a 10-year runway:
Avoid succession planning's biggest blind spot
An informal agreement between trusted partners may feel sufficient — until the unexpected happens. One advisor learned that lesson when a founder died before their succession plan had been formally completed.
See why advisors need to get succession plans in writing:
How Yeske Buie prepared the next generation to take over
Yeske Buie spent years prepping three partners to succeed its founders as CEOs rather than waiting until retirement. The incoming leaders say trust, candid conversations and gradual responsibility were critical to making the transition work.
See how one RIA built its C3O succession plan:
A $1.3B RIA finds a middle path to succession
Succession doesn't always require choosing an internal handoff or selling to an outside buyer. A $1.3 billion RIA used a merger to bring in another team — and a potential future successor — while maintaining greater control over the firm's future.
See how the firm created another succession option:
Stay for the sunset — or leave and sell?
Employee advisors approaching retirement may be able to participate in a firm's sunset program, but independence can offer another path: build equity in a practice and eventually sell it themselves.
Compare two paths for an advisor's final years:
