Ninety-nine percent of independent financial services and advisory practices go out of business when their founder retires, says FP Transitions.
Because of this, firms must view succession planning as a growth strategy, not a retirement strategy, according to a report released today by SEI and FP Transitions.
The paper, “Acquisition and Succession: Shift Your Focus from Retirement to Growth,” surveyed 771 financial advisors to gain insights on their acquisition, succession planning and continuity planning activities.
It reveals that while 32 percent of advisors claim to have a succession plan, only 17 percent have a binding and actionable agreement. This points to the need for advisors to re-assess their succession planning goals and strategies, says SEI.
“Advisors are beginning to realize that succession plans and continuity plans can actually become growth tools,” said John Anderson, head of SEI Practice Management Solutions, SEI Advisor Network.
When asked specifically about their long-term growth, advisors fell into one of two camps: those that want to acquire another firm, and those that want to grow their firm organically.
Thirty-four percent of those surveyed have never acquired another firm, but plan to. An additional 33 percent said they want to grow their firm by bringing in a new generation.
Less than half (45 percent) of advisors polled had a continuity plan in place in the event of an unexpected departure or leave of absence. Of those without a business continuity plan, 69 percent plan to implement one over the next few years.
“By taking the time to plan for the future, advisors are giving themselves a key competitive advantage in the present,” said Anderson. “The process gives them a clearer picture of their firm’s overall health, prioritizes finding a new generation of talent, and sends the message to clients that the firm will be viable for years to come.”