The lack of succession planning among financial advisors is reaching crisis proportions, according to Michael Paley, managing director of Focus Financial Partners, a financial services firm in New York City and San Francisco.

Less than 25 percent of advisors have a viable succession plan and even fewer have taken steps to implement the plan, Paley says.

“An advisor should start thinking about a succession plan when he or she starts the business,” says the executive for Focus, a firm that assists advisors in creating and implementing succession plans. “Structurally for advisory firms, the lack of succession planning is a scary situation.”

The lack of planning is particularly important because advisors over age 60 control $2.3 trillion in assets. According to recent research by Cerulli Associates, a financial industry research firm, nearly one third of advisors in the United States will exit the business in the next decade. The average age of advisors is now 50.9 years and 43 percent are over 55 years of age.

Succession plans are not only important to the advisor and the advisor’s family, they are also important to a firm’s employees and to the clients, Paley says.

“I think the SEC is going to become more vocal on this,” he adds. “In the independent financial advisory world, you are not living up to your fiduciary duty if you do not have plans for supporting your clients and their families when you retire or if something happens to you.”

The situation has gotten to this state because 70 percent of independent advisors are sole practitioners.

“They may not have the time, the ability or the willingness to be as thoughtful as they need to be in developing continuity for their practice,” Paley says. “The most pressing need for financial plans in on the small-firm side. It is a difficult situation because there has never been a broad, industry-wide solution to the lack of succession plans.”

Having a plan and communicating it to the clients, let’s an advisor stop worrying about it, he adds.