Advisers Need Succession Planning

Only 17% of advisers have a formal succession plan, according to a survey of 771 advisers by SEI.

 Nonetheless, 32% of independent advisers claim to have a succession plan. Furthermore, SEI says, 99% of independent financial services and advisory practices go out of business when their founder retires—highlighting the critical importance of creating a succession plan.

“Advisers are beginning to realize that succession plans and continuity plans can actually become growth tools,” says John Anderson, head of SEI practice management solutions, SEI Advisor Network. “By taking the time to plan for the future, advisers are giving themselves a key competitive advantage in the present. The process gives them a clearer picture of their firms’ 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.”

Succession planning can be achieved by preparing the firm for acquisition, merging with another practice or extending ownership to the next generation, SEI says. It should also include valuation of the firm. Nearly half of the advisers polled (42%) think their firm is worth one to two times the last 12 months’ revenue, and 43% think it is worth two to four times the last 12 months’ revenue.

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When asked about their plans for long-term growth, 34% of advisers polled said they have never acquired another firm but plan to, and 33% said they would bring in a new generation.

Equally important is having a continuity plan, should the founding adviser have to take an unexpected leave of absence, SEI says. However, only 45% of the advisers surveyed have a continuity plan. Of those without such a plan, 69% plan to implement one in the next few years.

SEI will highlight the findings of its survey on succession and continuity plans in a webinar Monday, June 30, at 4 p.m. (EST) titled, “Finding Your Path: How Advisers Can Grow Through Mergers, Acquisitions and Succession Planning.” To attend the webinar, register here.