No other single issue weighs as heavily on executives at independent broker-dealers as the advisor-succession challenge.

It’s a problem everyone knows about, but one without an easy solution.

As of 2013, the average age of advisors across the industry was 49 years, according to Cerulli data. At independent firms, it was 50 years. Among still active founders of firms, it is about a decade older.

And within the next decade, a substantial segment of this aging advisor force will be retiring. Surveys by Cerulli Associates show a “sizable uptick” in planned retirements in the next five to 10 years—21% of advisors say they expect to fold it in, according to a January report from the research firm.

“In the independent space, if we’re not bringing in new people, it’ll be a problem for the industry,” says Roger Ochs, chief executive of H.D. Vest, who thinks succession planning is the biggest issue for independent contractor firms.

“In about three years, the panic will set in” over succession planning, says David Goad, a consultant who works with many of the independent firms. “Firms will get overwhelmed” with retiring advisors, he says, with “the peak of it coming in the next eight to nine years.”

Over the next 12 years, Goad estimates that about half of industry assets and revenues will be turned over to new advisors. Independent broker-dealers are especially at risk for losing assets as their advisors exit the business. In the independent channel, 85% of advisors are solo practitioners, Goad says, making internal transfers impossible.

At the same time, independents have fallen behind in bringing new people into the channel, says Sanjiv Mirchandani, head of Fidelity’s National Financial clearing unit.

National Financial’s data shows that 30% of advisors across all channels are new to the industry, versus just 12% at independent broker-dealers.

An external sale to a third party is one option for a soloist, but successful external sales are rare. Finding the right fit and agreeing on a price and terms is a challenge. More important, many advisors simply don’t want to sell the practice they’ve built up over a lifetime. In the alternative, they often find that working a few extra years works out better financially than a sale, although that route leaves the succession question unanswered for clients.

Goad believes internal sales are safer for the parties, and better for clients. That’s why he expects regulators will favor internal transitions as they get more involved in setting guidelines and rules for succession planning.

State regulators especially “have a growing concern not just with diminished capacity for clients, but also about aging financial advisors and their ability to serve clients,” says David Bellaire, general counsel at the Financial Services Institute. At the firms, the need for transition plans is driving the growth of more teams.

“Teams are hiring multi-generations of people,” says Jim Crowley, chief relationship officer at Pershing LLC, and those people tend to be paid a salary rather than by assets or revenue.

“That’s important from the perspective of learning the business,” Crowley says. “And it’s a much more efficient way to train someone about the financial planning industry [and] create a succession plan for the practice.”

Wayne Bloom, chief executive of Commonwealth Financial Network, is seeing more advisor ensembles at his firm. “They’re not only getting together, but really being run more as professional businesses, where [the team] hires a chief operating officer,” Bloom says. That kind of management depth may help keep investors on board through a transition.

“There’s certainly more interest [among advisors] in identifying and bringing in someone who is a potential successor,” says Scott Curtis, president of Raymond James Financial Services. “It creates a tremendous opportunity for younger advisors.”

In Raymond James’ training program for new advisors, about a quarter are people who work for one of the firm’s independent contractors. “They’re typically paid a salary and hired as part of a team,” Curtis says.

Raymond James Financial Services is also hosting a series of open workshops, in partnership with Live Oak Bank, for any advisor who is thinking about succession planning.

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