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FAs Need to Get Proactive About Succession Planning

By Alex Padalka March 9, 2018

Financial advisors are increasingly aware of the risks posed by continuity and succession issues, but many have done nothing to address those problems, according to a recent report by Cerulli Associates.

Of advisors within 10 years of retirement, 28% are uncertain about their succession plans, Cerulli found.

The succession issue is particularly acute given the demographics of the industry. The average advisor is now 50 years old, and just 11.7% of advisors are under 35, according to the report. Advisors over 55 comprise 39.2% of the industry and manage 36.9% of the assets, Cerulli found.

To ensure continuity and solidify their succession plans, advisors need to understand how their practices appear to the next generation, Marina Shtyrkov, a research analyst at Cerulli, says in the report.

This includes reviewing compensation, training support and company culture, as well as considering expectations younger advisors have about work-life balance, she says.

“Firms will need to take their preferences into serious consideration because this next generation will ultimately shape the financial advice business," Shtyrkov says.

Advisors should understand they’ll need a different set of skills to be good leaders as opposed to financial advisors, according to Shtyrkov. To set the stage for growth and continuity, advisors need to be able to clearly convey their expectations and goals in recruiting and managing junior advisors, she says.

And — where they’re in play — home offices should step in to provide education and support to experienced advisors with bringing on new recruits, Kenton Shirk, director of Cerulli’s intermediary practice, says in the same report.

A “miss-hire” risks disrupting the practice and distracting lead advisors from their main responsibilities, he says.