One-third of wealth advisors plan to retire or leave the business over the next decade, Cerulli research has found, and they shouldn’t waste any time planning for succession.
The turnover in the business won’t stop after 10 years, of course. Cerulli said 71 percent of advisors will leave the business within two decades.
Over the first half of that time period, some types of advisors said they plan to exit the business faster than others. Dually registered advisors led the parade with 40 percent declaring their intention to leave. Other types of advisors and the percentages who will leave were: regional, 40; wirehouse, 34; registered independent advisors, 33; independent broker dealers, 33; insurance, 29; and bank, 23.
Advisors who need to plan for succession often have a number of obstacles they must overcome before a transition can be completed, Cerulli advised.
The task of finding a suitable advisor to take over a portfolio can be daunting and take more than a year, the report said. Grooming an internal successor can take longer.
When planning an exit from the business, advisors need to identify a suitable successor, and conduct due diligence to ensure the prospect can finance the deal, handle new clients and has had no regulatory problems.
Making a business more attractive to potential buyers can ease the frustration of seeking a successor. Using metrics that show who the client base is and forecast cash flow potential makes it easier for outsiders to assess the value of the practice.
Using technology to streamline operations and to document and analyze procedures can lessen the need to rely on a current owners during a transition.
Advisors also must be aware of a propensity by those planning a transition to find it difficult to give up decision-making.