The Retiring Wealth Management Exodus is Here, But With a Succession Plan, There’s Hope

December 16, 2021
Courtesy of Orion Advisor Solutions

Gone are the days when warnings of an aging wealth management workforce seemed to be a distant future. The industry’s seasoned veterans now average the age of 55, and the time has finally come where they’re ready to pass the financial baton to their younger counterparts. Unfortunately, one looming issue remains: these soon-to-be retirees have no current succession plan in place.

In the next decade, nearly 103,000 financial advisors plan to retire, accounting for 40% of the wealth management field, according to Cerulli Associates. To make matters worse, the global research and consulting firm further states that this retirement exodus has already begun.

With these advisors currently accounting for $1.8 trillion of industry assets, creating a succession plan to transition their practice to the next generation is needed now more than ever. But three-quarters of financial planners have merely a rough idea of a strategy, or no plan at all, the Investment Planning Counsel reports.

To aid advisors in stepping away from their firm’s day-to-day activities and transitioning their client list to a trusted successor, we’ve compiled a list of actionable strategies to jump-start the training and planning that’ll set up junior advisors for success.

  1. Develop a Financial Planning and Investment Philosophy

    Your firm’s philosophy helps articulate to potential successors what your firm stands for and what your clients have learned to expect from your financing planning. It’s important to take the time to standardize your culture by developing a set of core values that sets the stage for the future of your firm, even as it’s passed on to the next generation.

    Draft up key driving values for how you run your firm, then write a strong mission statement that defines your business’ philosophy and focus all these years. This can also provide internal respite in knowing that you left a legacy your team can rely on, but also build upon.
  2. Create a List of Suitable Successors

    A recent TD Ameritrade study found that more than half of advisors (69%) prefer to hand off their firm internally over a potential merger or acquisition. Bringing an existing advisor in their practice, a junior advisor, or even a family member into the fold, however, can still be a challenging process.

    Generate a list of potential successors who you trust in sustaining the firm long after you retire and also believe will provide your clients with adequate care. Consider the strengths and weaknesses of your advisors, which can help determine who may be the best fit for your clients while also scaling growth.

    You may also want to assess whether this individual is a match for the firm’s culture and can best represent the values and philosophy your clients have come to expect and trust from your firm.
  3. Institute a Training Routine

    How you train your entire team is incredibly important to your firm’s success, particularly, the advisors who most frequently interact with your firm’s new and existing clients and prospects. The best way to make sure your advisors all provide the same level of service as you is to train them yourself, including giving away all your tips and tricks on how to be a great advisor.

    Your team will not only appreciate the guidance and insights, but you can rest assured knowing you’ve done your part to help them provide the best client experience. You can also create a specialized training course, coupled with processes and workflows, that serves as a reference guide when you’re no longer present to answer their questions.
  4. Pair Junior Advisors with Senior Advisors

    According to Cerulli Associates, the minimum timeframe to properly groom a junior successor is two years, while the most, the firm claims, is ten years. While you may not have a full decade to train and transition your entire staff, you can speed up the process by connecting junior advisors with those who have more experience within the field.

    Your younger financial planners can immediately begin shadowing your team’s senior cohort, joining them in client meetings. This will provide them with the confidence to soon handle more responsibilities and become familiar with your firm’s process.
  5. Begin Transitioning Your Clients
    Here comes the challenging part: handing off your clients to a trusted source. While it’s no easy feat to give away your career’s worth rolodex of cultivated relationships, it’s imperative to have ultimate faith and confidence in your selected successor.

    In order to help make the transition as smooth as possible, consider holding a couple meetings where both you and your successor attend, so the handoff can occur gradually rather than being an abrupt change. This not only helps retain your current investors, but also enhances your advisor-client journey, as they’ll have the assurance of continued quality of care.
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