In Practice June 3, 2010

Most RIAs Lack Formal Succession Plan

While most surveyed registered investment advisers (RIAs) said succession planning is important to their clients, less than half of RIAs have a formal plan.
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The quarterly survey of RIAs by TD AMERITRADE Institutional found that more than half (57%) of RIAs reported not having a formal succession plan or business valuation (88%) in place—despite the average age of respondents being older than 50. Thirty-nine percent of advisers reported they do have a succession plan and 4% said they are developing one.

Advisers who do have a formal succession plan most commonly plan to transition their firms internally to a key employee or a group of employees (49%), followed by selling the practice and exiting the business or merging with another firm (18%). Almost a third (29%) has not decided what type of succession option they will implement.

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Having a key employee to pass a book of business to is important, the survey suggested. Finding a qualified candidate to transition their business to is the number one reason those who don’t have a succession plan said they don’t have a plan (42%), according to the survey.

The other top reasons advisers don’t have a succession plan include not believing a succession plan is important at this career stage (32%) and lack of time to develop a plan (20%).

The top five reasons surveyed advisers cited for having a formal succession plan include supporting the long-term viability of the firm (57%); satisfying client expectations that a succession plan is in place (52%); providing a smooth transition into retirement (36%); providing continuity for employees (36%) and enhancing the valuation of the firm (32%).

“While some advisers may not be ready to sell or exit the business, anticipating the unexpected and putting a plan in place for the future can help put employees and clients at ease while positioning for the long-term viability of the business,” said Mike Watson, director of practice management, TD AMERITRADE Institutional, in a news release.

Nearly half of surveyed RIAs said they know the value of their firm (48%), but only 12% said they had a formal valuation completed in the last 12 months.

Most respondents (61%) said building a wealthier book-of-business is the common path to higher valuation. RIAs also look to improve firm valuation over the next 12 months by improving staff skills (28%), adding staff (26%), implementing a marketing plan (48%), improving operational efficiency (40%) and investing in technology (38%), according to the survey.

TD AMERITRADE surveyed 500 advisers.

Products June 3, 2010

BofA Merrill Revitalizes Recordkeeping Platform

Bank of America Merrill Lynch has enhanced and renamed its small business retirement plan platform, MLConnect, to” more closely align with small business owners’ evolving challenges and priorities.”
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Now named Advisor Alliance, the platform was introduced in 2001 and has more than 40,000 clients and $23 billion in assets, serving more than 900,000 plan participants.

The recordkeeping platform, geared primarily at small and mid-sized business clients, offers a combination of investment screening and due diligence conducted by Merrill Lynch Wealth Management investment professionals and recordkeeping and retirement plan administration services from a group of Bank of America Merrill Lynch’s alliance partners.

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The company cited three main changes or updates to the Advisor Alliance platform:

  • Plan Sponsor Investment Review: Through a Web-based portal, financial advisers can review the investment performance of retirement plan funds and generate customizable quarterly investment review reports for small business owners. In addition to showing how funds are performing relative to their peers and, when appropriate, presenting alternative funds. The reports also include an in-depth look at recent market trends and commentary on individual asset classes and important factors that may impact the investment portfolio, as well as key retirement plan participant usage metrics.
  • Alliance Partner Governance and Expansion: Merrill Lynch financial advisers can select retirement and other benefit plan and investment options for a client from a group of preferred, nationally recognized partners made up of third-party administrators (TPAs) as well as payroll, insurance, and mutual fund providers. Bank of America Merrill Lynch said it performs due diligence–including a thorough review of platforms, business practices, and security protocols–on each of the alliance partner companies and also monitors and measures their ongoing performance. The company also said it is continuously searching for providers and programs to be added to the Advisor Alliance partner network.
  • Plan Design Options: Small businesses can select from a range of plan types, including 401(k), Roth 401(k), Safe Harbor 401(k), profit sharing, and 403(b) plans, as well as plan design features including automatic enrollment and automatic increase programs.

“The latest affirmation of our commitment to small business owners centers on improvements to our retirement solutions,” said Andy Sieg, head of Retirement & Philanthropic Services for Bank of America Merrill Lynch. “Advisor Alliance offers these owners a more flexible, personalized suite of retirement plan and investment services designed to help them simplify their lives and remain focused on their personal and business goals.”

According to Bank of America Merrill Lynch, more than 8,000 of the company’s 15,000 Merrill Lynch financial advisers work with small business owners to serve their retirement plan needs. Earlier this year, Bank of America Merrill Lynch introduced a Retirement Plan Referral Network of Merrill Lynch Financial Advisors with proven experience in serving business owners who have less than $10 million in retirement plan assets (see “BofA Merrill Introduces Retirement Plan Adviser Designation“).

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