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In Practice July 18, 2025
Tackling Succession Misalignment in Advisory Firms
Three-quarters of RIA and broker/dealer firm owner respondents said they lack a clear plan of succession, which could alienate future leaders.
Reported by Edward Rueda
Art by Silvia Casanova Fenollosa
A fictional family struggle to control a media conglomerate made for gripping television on HBO’s “Succession,” but many registered investment advisers and broker/dealer-affiliated advisers are potentially facing their own succession crises. A recent survey by wealth management platform Kestra Holdings found that 75% of responding Generation 1 advisers—firm owners planning to retire in the next decade—lacked a formal plan to transition management responsibilities to Generation 2 advisers—their potential successors.
This lack of planning could lead to a firm losing its rising leaders, as one-third of G2s who participated in the survey said they would possibly leave their firm if no clear succession plan was in place. Succession plans need to fit the needs of both G1 and G2 advisers.
Scott Cohen, the founder of CD Wealth Management, a Dallas-based financial advisory firm, opted for a gradual transition when he stepped down as CEO. Speaking recently at a panel in New York, Cohen shared how he spent years mentoring his successor, Ilona Friedman, before appointing her.
Cohen wanted his firm to have fresh leadership at a point in his career when he could still work at full capacity with his clients and be available to Friedman for advice and encouragement.
“I never wanted to lead the firm past my prime,” Cohen said. “I feel more energetic than I have in a long time.”
Effective Succession Planning
While 69% of surveyed G1s said they felt confident about their firms’ future leadership transitions, only 6% had a fully documented succession plan. More than three-quarters of responding G1s lacked clear timelines for transitioning client relationships and allowing successors to acquire equity.
Many G1s responding to the survey shared their emotional concerns about succession planning. More than half said it was difficult to give up control of the company they built, and 38% were uncertain about their post-retirement plans. G1s also worried about clientele, as 41% feared clients would receive worse service after they left.
On top of misgivings from G1s about succession, nearly two-thirds of G2 respondents said they did not feel fully prepared to take on their practice’s leadership. Almost half of the surveyed G2s said they wanted more leadership opportunities in strategic planning and business financials, and 20% wanted more responsibilities in financial planning with clients.
Equity compensation was another major concern for G2s, as only 41% of surveyed G1s said they transferred equity. One-quarter of respondent G2s said they would consider leaving a firm that did not offer them equity or a timeline for acquisition.
More than one-third of surveyed G1s thought they had “plenty of time” to decide about succession, but Kestra recommended leaders not delay. Rather, a transition should be a multi-year process, letting G2s fully prepare to take the reins.
“Effective succession planning solutions support both G1s and G2s,” said John Amore, Kestra Financial’s president, in a company video. “We know it’s always going to be a process, but it doesn’t have to be messy.”
Kestra recommended G1s build trust with G2s in their company through transparency, increased leadership training and mentorship. Kestra’s report on the survey recommended that firms customize the transition process to suit their own circumstances and formally document succession plans to clarify communication and expectations.
Kestra conducted individual interviews with 10 G1s and 10 G2s, while another 269 financial advisers completed an online survey from October through November 2024.
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