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"Overall, I think the industry has been active in discussing this issue and developing programs for advisors to help them with succession planning, but clearly the need to do more continues," said
Preparation for Succession
Although many advisors have a plan to make sure their practice can continue if they are unable to work (56%), few have a completed succession plan or have an excellent estimate of their firm's value.
- Only 11 percent have completed a succession plan. About a third have started but not completed a plan (34%), while 44 percent said they've thought about making a plan but not started one; an additional 12 percent haven't even started thinking about creating a succession plan.
- Only one in ten has an excellent estimate of the value of their practice (10%), though 33 percent have what they consider to be a good estimate. More than four in ten say they have some sense of the value of their practice, but not a good estimate (44%), and an additional 12 percent say they do not have any idea how much their practice is worth.
Why not prepared
While strong majorities believe the industry does not do a good job of helping representatives plan for succession (81%), most admit that they, too, are a roadblock in planning for their succession: 55 percent agree that they are too busy with their practice to think about succession planning, and 53 percent agree that they have procrastinated too much when it comes to this issue.
Interestingly, the different channels of advisors surveyed – independent broker dealers, independent advisors/planners, and career agents – show few differences with regard to their views toward and preparation for succession.
It is possible some of the advisors' hesitation in planning comes from not knowing how they want to retire from their practice.
- Only 20 percent are very certain about what they will do with their practice when they retire, though it appears few plan to retire all at once. Many plan to reduce their practice activities before they retire (52%), and 42 percent currently have a plan in place to continue working with key clients (another 45% say they intend to create a plan to continue working with key clients).
- Most either have a protege now (30%) or are likely to hire one in the future (among those who do not have a protege, 67 percent plan to hire one). Sharing a philosophy with the protégé and working with them for a number of years are key considerations in hiring someone to take over their practice (important to 96% and 94% of advisors, respectively).
Lack of knowledge, concerns about succession planning
Many advisors do not feel knowledgeable about the aspects of succession planning they consider to be most important. This includes finding a successor, important to 85 percent of respondents, with 41 percent not feeling knowledgeable about it; obtaining a valuation of an investment business, which 83 percent feel is important, and 42 percent not knowledgeable; valuation of a fee-based business (72%, 49%); access to financing (71%, 60%); valuation of an insurance business (66%, 56%); and arranging third-party management of the transition (57%, 71%). In addition, at least seven out of ten responding advisors consider each of those issues to be a challenge for them.
Advisors cite a number of concerns in succession planning, including obtaining cash for their business (80%), maintaining relationships with key clients (70%), financing a transition (69%), annuitizing their business (69%), and bringing along a younger rep (66%).
Client service is also a key consideration: 56 percent list leaving clients with a lower level of service as a concern, and another 47 percent agree that they do not believe they will be able to find someone who will service their clients as well as they do.
Most valuable forms of succession planning support
When presented nine services that a succession planning platform might offer, best practices for making a practice more valuable is by far the most popular with 79 percent of advisors interested in this service, though majorities are interested in each of the other tested services as well.
Two out of three advisors would be interested in receiving assistance in structuring an acquisition on either the buy or sell side (67%), assistance in designing and implementing a transition plan (67%), receiving support with a continuity plan (67%), or third-party evaluation of their entire practice (65%).
Slightly fewer – roughly six in ten – would be very or somewhat interested in ongoing valuation (63%), financial support for the transaction (62%), or finding someone to purchase their practice (59%).
Advisors affiliated with Signator have access to support for financial planning; an integrated technology platform; defined contribution resources; a dedicated practice management team; a marketing portal providing turn-key programs with compliance-ready, customizable templates; an annual practice advancement conference; a top producer program and an industry-leading equity and succession program.
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SOURCE John Hancock Financial