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Super-OSJs Should Tap Into Their IBD ‘Farm System’ for Succession Planning

Three questions to ask when placing veteran advisors with up-and-comers from broker-dealers.

By Kiliaen Ludlow

For super-OSJ groups serving independent advisors, the ability to replenish the talent pool when veteran professionals retire is vital. This issue has taken on added significance in recent years, as escalating regulatory costs and complexities due to the Department of Labor’s fiduciary rule have caused many older advisors to accelerate their retirement plans, leaving a number of super-OSJs without qualified newcomers to take their place.

To navigate this mini-crisis successfully, super-OSJ groups will have to redouble their efforts on facilitating succession plans between their existing advisors and more-junior professionals. And this is where it's important for such groups to lean on their broker-dealer, which ideally has stocked its "farm system" with plenty of young professional talent, similar to how Major League Baseball teams groom promising young players in the minor leagues each year.

Here are some key questions for super-OSJs to consider in a post-DOL environment: 

  1. Does the data demonstrate that your broker-dealer has a track record of connecting advisors with super-OSJs? Broker-dealers can play a valuable role in pairing veteran advisors seeking to add junior partners with younger advisors hoping to grow by teaming up with a more seasoned professional. In particular, super-OSJs should ask how many successful practices the broker-dealer has helped build over the previous year; whether it maintains a database of the specific competencies various practices hope to add; and whether it maintains a similar record of practices that could be for sale in the near future.

    Other key questions include how well the broker-dealer facilitates connections between colleagues across demographic groups (important not only round out a practice’s service offerings but to bolster its ability to serve the next generation of clients) and how many of those arrangements have progressed into full-blown succession agreements.

  2. Does the broker-dealer's technology platform help potential succession partners smoothly integrate their practices? Facilitating connections between potential succession-planning partners ultimately serves no purpose unless the practices can combine their businesses in a way that minimizes disruptions. With that in mind, super-OSJs should not only familiarize themselves with the particular technology solutions utilized by their broker-dealer but with the firm’s overall level of sophistication when it comes to integrating technology platforms. Do they understand, for example, which reporting, aggregation, and trading and rebalancing platforms will work to help the new group maximize scale seamlessly? Also, if one or both partners need to shift to the broker-dealer’s standard technology platform to ensure uniformity and consistency of services, can the firm guide them through the process of upgrading without creating too much disorder? 

  3. Can the broker-dealer provide financing to make succession plans a reality? Advisors can’t piece together the expertise and financing needed to translate a succession plan into reality by themselves. They need help. Broker-dealers should be able to tap into internal or external sources of funding—in addition to appropriate legal, tax and valuation resources—to ensure that advisors can get their succession-planning transactions across the goal line once they have identified the right partners.

With ongoing regulatory uncertainty colliding with demographic trends in the advisor workforce, super-OSJ groups that support advisors may soon find themselves facing a wave of advisor retirements that will make the ability to facilitate effective advisor-succession plans a strategic imperative rather than a "nice to have" recruiting bullet point. By focusing on the criteria above, these groups can successfully leverage their broker-dealers as a sort of "farm system" and place themselves—and their advisors—ahead of the curve.


Kiliaen Ludlow is Senior Vice President of Relationship Management at Triad Advisors, the Atlanta-based, hybrid, advisor-focused independent broker-dealer.

TAGS: Careers
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