The upcoming succession crisis

Over the course of a career, every financial advisor spends a great deal of their time building.

Helping clients as they build their wealth and portfolios. Building relationships. Building their own skills. Building a practice. A brand. A book of business.

With so much to be done day-to-day, it’s easy to understand why one important element often gets put off: succession planning. But we’re approaching a point in our industry where a general lack of attention to this area is beginning to become critical.

It’s no secret that the average age of advisors continues to go up. With few firms hiring, training, and developing new advisors, the pool of potential successors – the next generation of advisors - is getting smaller. But that next generation will play a key role in continuing the legacy of experienced advisors who are looking to move on to their next chapter.

I believe the upcoming succession concerns can be addressed by placing more focus on developing this next generation of advisors.

DEVELOPING THE NEXT GENERATION

We’ve seen firsthand the benefits of bringing new entrants into the profession at Equitable Advisors. In fact, we hire, train, and develop hundreds of new advisors every year. As a result, the average age of our advisor is 47— eight years younger than the industry average. The unique demographics of our firm help experienced advisors develop their teams and plan for the future of their business. They can get to know these new advisors, identify those that might be a good fit for their teams, and help to develop, mentor, and broaden the experience of junior advisors – all efforts that support growth and contingency for their practices.

If you're at a traditional independent broker-dealer or another firm where they're not hiring and developing new advisors, your only source for finding new people to bring in as part of your succession plan is to go outside to recruit an experienced advisor. You’ll have to determine if this is an aspect of running your business that you’d want to take on.

THE VALUE OF BEING PROACTIVE AND BEING IN CONTROL

In addition to having a pipeline of talented advisors to build your team, it’s important to plan ahead for your succession. By doing so, you take away an element of unpredictability – much as you try to do for your clients. You want to remove as much uncertainty as possible.

There’s a real business benefit to being proactive. You may have clients younger than you, who plan on working for another 20 years or so, after you’ve retired. If you started off by introducing them to a junior advisor whom you’ve integrated along the way, that provides a sense of continuity and stability – and helps secure the relationship for the long term.

LOOKING AHEAD

As you move forward with your business as an advisor, it's essential to consider what you want to ultimately happen with your practice. How will you ensure continuity and a seamless experience for your clients? And how will you make sure you’re set up to benefit from the business you’ve built? Having the option to collaborate with a firm that has established resources and relationships for succession planning is invaluable.

Succession planning can be reinvigorating for your business and your practice. Going through the process can be energizing when you realize that you’re building something bigger than yourself. Many advisors are out there operating alone. When they start to build a team and think about continuity, they have that sense of being part of something that will carry on, that will last beyond them – and they have the assurance that everything will work out smoothly, for the benefit of all involved.

David Karr is chairman of Equitable Advisors.