With the growing number of advisors looking to exit the business and a potentially smaller pool of successors to choose from, there is strong motivation to begin the succession planning process. So what obstacles are keeping advisors from developing their own plan?
Not knowing where to start was the most common answer from advisors in the recent WealthManagement.com survey, with nearly 4 in 10 advisors noting a lack of confidence in how to begin the succession planning process. This response makes sense, given that a succession plan has multiple moving parts and is a process that few advisors have gone through before.
Difficulty finding the right successor is another big challenge, with 23% of advisors listing it as the most common deterrent to writing a succession plan. It’s no surprise that nearly all advisors (95%) said that finding a successor who was both ethical and the best match for their clients was critical or very important. “Financial professionals often have clients that they’ve worked with for decades. They are friends. They know their spouses, children, and often even their grandchildren,” says Fulks. “Advisors want to make sure that their clients are in the hands of someone who will care for them as well as they have.”
Finally, 22% of survey respondents cited difficulties figuring out the mechanics of structuring a deal as the last of the top-three deterrents to succession planning. It’s true that selling a business can be a complicated transaction, which is why advisors should start educating themselves about succession planning. Reading articles, attending presentations, taking a firm-sponsored seller’s preparation course, and talking to peers who have gone through the process can help advisors understand what to expect. Then, they can begin tackling the specific steps of creating their own succession plan.