It is somewhat ironic that a lot of financial advisors are not prepared when it comes to handing their practice over to a successor, when you consider that fact that business succession plans is something a lot of financial advisors focus on with their clients. A 2015 study conducted by Fidelity investments revealed that only approximately 25 per cent of advisors have clear successors in place, despite the fact that two-thirds would prefer to change ownership internally. Moreover, only 40 per cent of advisors have some form of succession plan in place. So, why are financial advisors avoiding succession planning?
They’re not ready to sell
One of the main reasons why a lot of financial advisors are yet to develop a succession plan is because a lot of people think that succession planning and selling come as one. Because a lot of financial advisors are not ready to sell their firm, they do not feel that they need to have a succession plan in place. Moreover, a lot of financial advisors are not in the position to retire and sell up because they have not taken care of themselves and prepared for the retirement phase. This sounds ironic, but it can often occur because financial advisors have been too busy taking care of everyone else’s monetary situation.
Fear of the unknown
A lot of financial advisors simply do not put a succession plan in place because they keep putting it off out of fear. They tell themselves that they have other tasks that are more important and more urgent, however, it can often be the case that a lot of financial advisors are grounded in the fear of the unknown and this makes them extremely hesitant about ceding their business’s control.
They can’t find the right personnel
In addition to this, a lot of financial advisors struggle to find the right people to replace them. After all, it can be overwhelming to recruit and train young advisors. However, it is important to recognise that the people you choose are going to carry on the legacy of the business you created. It is also important to see succession planning as the continuation of business growth, rather than simply handing over the reigns to someone. It is always a good idea to consider options internally. Identify individuals that have the potential to fill in your shoes, and identify any weak areas whereby you may need to train them.
And that’s not all….
Other reasons for putting off succession planning include the fact that some financial advisors don’t know where to start, while others are waiting because they hope that their son or daughter will enter the firm. Aside from this, another reason to wait is because you may want to reap the benefits of any clients that will be retiring soon, or you feel like you cannot afford to retire yourself.
No matter what situation applies, it is imperative that you start succession planning sooner rather than later. Who knows what situation could arise and cause you to sell your firm quicker than imagined?