When Casey Jorgensen entered the RIA mergers-and-acquisition space 10 years ago, all she heard about was the “silver tsunami” of founder retirements that would advance next-gen partners, allow for outside investment and modernize those practices with fresh tech and new services.

But it didn’t happen.

“And 10 years later, we’re still saying, “Oh, there’s going to be this huge silver tsunami. There’s going to be so many retirements,” said Jorgensen, senior vice president for relationship management at Dynasty Financial Partners, a tech solutions provider for wealth managers.

After all, the demographics of financial advisors indicate that is what should be happening, she said. But while there has been a rise in M&A volume, it’s nowhere near the predicted level.

What’s not contributing to the disappointing flow of older advisors exiting their practices is higher interest rates, she said, because private equity firms are eager to invest. And it’s not that high valuations are preventing successors from buying out managing partners either, as there are lots of creative capital solutions available and an eager next gen, she said.

“What’s really going on here is that advisors are retiring through attrition,” she said. “They’re taking their foot off the gas pedal, and allowing their valuations to erode—their businesses to erode—because their clients are also retiring and passing away.”

Founders are doing this, she continued, even though they know it’s “not good for their valuation or their staff, their clients of their family.”

“Which is ironic, because we’re an industry that obsesses over helping clients prepare for retirement, and yet advisors don’t do it for themselves,” she said.

Jorgensen made her comments during a webinar with Dynasty Financial Chairman Andrew Marsh that focused on advisor succession.

“Every best practices, every conference, someone stands up and says, ‘Succession planning’s really important. You should have a succession plan,’” Marsh said. “But then there’s no teeth put to it, no tension on it, and no follow up.”

Marsh called the risk to advisory businesses where there is no succession plan “the dark side of the business.”

Marsh said he had personal experience with the problem, citing a former partner who refused to retire despite the fact that clients were beginning to transfer out of the business.

“My job as CEO was to protect the firm’s interest. And this person literally said to me, ‘I’m going to retire the day my last client transfers out,’” he said. “And, man, that bothered me. Because it really showed the dark side of the industry where we start out as professionals who are happy to help our clients with their wealth, but then we become entitled and complacent and assume our client’s wealth is there to facilitate our plans.”

The lack of succession planning is starting to create a new class of firms, which he called “the breakaways from the breakaways,” where next-gen partners, fed up with waiting, strike out on their own.

“These are mostly driven by failed succession plans or a failed ability to communicate a proper succession plan,” Marsh said. “And it’s a massive risk to the organization.”

Marsh said advisors who are struggling to reconcile their position in the firm they’ve built with the need to retire before the firm starts to decline was to think about the original goal of the business.

“Did you dream of launching this RIA as a vehicle that you would sell one day to create wealth for you and your partners at a certain point in time?” he asked. “Or did you launch your RIA with a dream that 50 years from now, your brand and your legacy is still alive?”

If the idea was to create wealth by selling, then the perfect succession plan is to sell, he said. If the plan was to build a legacy, then the perfect succession plan is to pass the business to qualified partners already promoting the name on the door with their hard work.

For advisors in the second camp, figuring out what each generation in the firm wants and then looking for a customized answer that checks everyone’s boxes is the goal, Jorgensen said.

“Generational differences are huge in succession planning. With the silver tsunami, the generation they’re part of is the boomer generation that redefined working to live. They live to work,” she said. “And they’re redefining retirement by not fully retiring.”

For next-gen partners, this looks like the founder’s controlling tenure will never end, and what was promised in the concept of succession will not come to pass, she said.

A common and successful compromise is allowing for a defined consulting period, during which next-gen takes the reins with the promise that the founders will still have a voice in the firm's operations.

“The best strategy for that is to create that consulting period, and during that consulting period allowing the retiring advisor to start taking days off or have reduced hours or serve in mentorship capacities as the book [of business] is being transitioned,” Jorgensen said. “They still have value in their role, but a timeline for it.”

The impetus for committing to the transition goes beyond firm valuations and making next-gen leaders happy, Marsh said. There’s a fiduciary aspect to ensuring client assets receive the best consideration possible, and founders have to at least plan for a future where those assets are looked after by someone else.

“How can you have a 70-year-old RIA fiduciary who hasn’t thought about the right thing for their clients?" he said. "It’s why I think, in the next five to 10 years, change is coming. I think regulators are going to start to question why there are so many 70-year-old RIA CEOs, and are they really looking after their clients?”

He stressed there will always be a segment of the septuagenarian RIA population who are still engaged, highly professional and maintaining a high fiduciary standard.

“But we’re talking about the ones that aren’t and that take complacency and entitlement for granted,” he said.