Larger firms are better prepared for the coming wave of retiring financial advisors, even though they will see the largest portion of advisors retiring.

That's according to new research from Cerulli, which says in its U.S. Broker/Dealer Marketplace 2019 report that 37 percent of advisors are expected to retire in the next 10 years, putting nearly 39 percent of industry assets "in motion."

And between year-end 2018 and 2023, Cerulli projects that total advisor headcount will fall by 1.4 percent.

According to the report, wirehouse (40.7 percent), independent broker/dealer (40.7 percent) and national and regional broker-dealer (39.7 percent) channels will see the biggest exodus of advisors who are perhaps even now planning to retire and transition their businesses within the next 10 years.

Hybrid registered investment advisor channels (31.1 percent) and bank B-Ds (24.7 percent) will have smaller groups making their bow within the next 10 years.

According to Cerulli, "Across all channels, 28 percent of advisors who plan to retire in the next decade expect an advisor in their practice to succeed them, while 22 percent have no plan."

A CNBC report points out that larger firms are doing better, in general, with succession plans—yet since the average age of financial advisors is in their mid-50s, with many already in their 60s and 70s, "the fate of thousands of practices remains in doubt."

It cites studies that indicate that "most small advisors—particularly solo practitioners—have no successor to fill their shoes."

They also lack good prospects to sell their practices; the report adds, "The reality is, they probably never will." And that means most of those small practices will simply fade away, leaving clients in the lurch.

David Grau, president of consulting firm FP Transitions, is quoted in the report saying, "The No. 1 way that independent advisors exit the industry is through attrition. They don't spend on technology and they don't market themselves. When they finish their careers, there is nothing left of their business to sell" or pass on, he added, concluding, "It's a terrible reflection on the industry."

Grau estimates that of the "two buckets" of small independent practitioners, there are solo practitioners who bring in approximately $250,000 in annual revenue who, though they manage assets and do financial planning, generally have no succession plan.

Shockingly, he says they "represent about 70 percent of the industry."

Then there's the other bucket, consisting of slightly bigger firms who lease office space and have staff to consider. They're more likely to have given some thought to what would happen to the business should the owner die or retire.

They may not want to sell, but their business is their largest asset—and they realize that they "need to do something."

Michael Rose, associate director of wealth management at Cerulli, says, "While some progress is being made, the industry is struggling to recruit and retain advisor talent that is adequately prepared to inherit the businesses."

As the industry tries to cope with this, he adds, firms are working harder—on recruiting to woo new advisors into the industry, and on training to better their success rates.

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Aging, retiring advisors behind the curve on succession planning

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