Coronavirus crisis puts advisor succession planning in focus

Exit plans now more top-of-mind as longstanding problem of aging workforce comes into sharp relief

Coronavirus crisis puts advisor succession planning in focus

The wealth management industry is scrambling as the coronavirus pandemic accelerates a retirement crisis — and no, it’s not about the clients.

With questions of health, longevity, and business continuity gaining more prominence than ever, firms in the U.S. are giving some much-needed reflection to when and how many advisors are leaving the workforce, and who will be there to replace them, reported Business Insider.

“What we're seeing is a big lineup of firms coming to us and saying, 'When this is behind us, once we get our hands around it — we really want to talk about this more seriously’,” said Stuart Silverman, president of Bluespring Wealth Partners. Bluespring is in the business of buying up RIAs and wealth-management firms in the U.S., as well as providing them with succession planning and other services.

Citing figures from Cerulli Associates, Business Insider noted that some 37% of financial advisors in the U.S. are expected to leave the business before the end of the decade. The ones forecast to retire by 2028 represent US$7.76 trillion in assets, which makes up 39% of wealth managed by U.S. advisors catering to the retail market.

COVID-19 might have kicked that shift into a slightly higher gear. Jeremy Holly, who is in charge of advisors’ succession, merger, and acquisition services at LPL Financial, told Business Insider that some advisors are “looking to get some liquidity” and “take some chips off the table.” He also reported seeing more interest in partial book sales, with advisors looking for opportunities to hand over some of their clients to another professional.

Getting new blood is also shaping up to be a challenge. A 2018 survey conducted by the Financial Planner Association found that out of 400 financial advisors, only 41% reported having a succession plan, with 27% saying they had a formally documented plan.

As the pandemic leads to a new reality of social distancing and economic uncertainty, some firms are scaling back their efforts to attract and train up new talent. Merrill Lynch Wealth Management is reportedly suspending interviews for its advisor trainee program, which is said to include 3,000 to 3,500 participants at any given time.

“This hasn't only been a market shock, but it's been something that could potentially hit close to home," said Brandon Kawal, a principal at wealth-management consulting firm Advisor Growth Strategies. “Advisers are saying, 'Okay, well wait a minute, what is my succession plan?' and bringing that to the surface strategically.”


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