Nearly nine tenths of advisors have no formal succession plan

Study suggests most advisors nearing retirement or have started to think about succession, but prioritizing growth at the moment

Nearly nine tenths of advisors have no formal succession plan

It’s no secret that in Canada’s financial planning industry, the majority of professionals are at a point in their careers where they should at least be thinking about how to pass the baton. But according to new research from Investment Planning Counsel, most are woefully unprepared.

In a study of almost 360 independent financial advisors IPC conducted with Environics Research Group, 69% of respondents said they’re nearing retirement or have started creating a succession plan in one form or another.

However, just 11% said they have a formal succession plan. What’s more, three quarters (75%) said they have only a rough idea of how they’ll go about it, or have no plan at all.

“The risks of not having a plan are significant for advisors, their families and their clients," said John Novachis, executive vice president at Investment Planning Counsel. “They range from not having someone to carry on the business in the event of a sudden illness or loss of life, to the loss of confidence among clients, to jeopardizing an advisor's own retirement plans.”

Why is succession planning falling by the wayside? One possible reason is a focus on growth; regardless of where they are in their careers, most advisors surveyed said they continue to prioritize growth over succession planning, particularly in the wake of the COVID-19 pandemic. Eighty-three per cent of advisors said they consider growing their business a priority at this time, and 96% said one of the most important reasons for growth is “having a positive impact on their client’s financial success.”

“We understand that growth is an ongoing priority, especially as Canadians turn to advisors for major planning decisions, including legacy and inheritance planning,” Novachis said.

Whether it’s succession or growth, however, the majority of advisors agreed that getting support from their dealer is crucial. In terms of succession planning, 90% of advisors in the survey said receiving dealer support is important to them; 67% rated it as very or extremely important. Over three quarters of participants (77%) said that simplifying the process and formulating a high-quality plan are paramount.

Eighty-five per cent of the advisors polled agreed that dealer support is important for growth, and more than 96% considered it crucial to get technological and operational support from their dealer.

To support advisor’s growth priorities, IPC engages and partners with advisors to provide coaching, choice in portfolio management platforms, marketing and branding, and strong technology enablement. IPC also started ramping up its focus on succession planning support three years ago, Novachis said, as it recognized the growing need among its advisor partners.

“We believe advisors have choices in how they succeed: to groom a junior successor, sell to a peer, or sell to a strategic buyer like IPC,” he said. “We will work with advisors to determine their best choice, then help map and formalize their plan.”


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