A recent CNBC article reported statistics from Cerulli Associates that were particularly insightful about the demographic make-up of financial services advisors. According to Cerulli Associates, 40% of advisors plan to retire in the next 10 years and currently there are more advisors over the age of 70 than under the age of 30. What this data indicates for the financial services industry is compelling. Over the next decade a shift of seismic proportions is coming as older advisors retire and younger advisors enter the industry in search of opportunity. A decade; however, leaves a lot of ground to cover and the question becomes how to keep the aging advisor happy – particularly when the industry is seeing so many teams and advisors transition to RIA, independent, and hybrid firms – while still attracting the young advisor eager for growth potential? The answer is simpler than you might think.
Succession programs are one of the most efficient ways for a firm to acquire young talent while honoring the work of the older advisor. Young advisors entering financial services today are seeking out firms with structured programs to help them achieve success. The most attractive firms to young advisors offer education and mentoring programs, cutting-edge technology resources, business operations support, and growth opportunities such as client acquisition potential through succession programs. For the retiring advisors, a succession program forges a legacy by not only offering financial benefit and stability in retirement but by providing continuity of service to clients with whom relationships in all likelihood span the course of many years.
It is no wonder, with succession planning playing such a vital role in the career of an advisor, that financial services firms, regardless of type, use succession planning as a carrot to dangle in order to attract and retain talent. Nearly every wirehouse – from Bank of America and Morgan Stanley to Merrill Lynch and Wells Fargo – offers some version of the same succession program whereby an advisor is paid a percentage for their trailing book of business over a fixed number of years based on their time with the firm. For the younger advisor acquiring a book, these same firms will offer financing options to make the acquisition feasible, but often with a hefty price tag to the advisor in the form of a lengthy contractual agreement and financial penalties if the original acquisition terms are voided.
Succession programs can also be found at the top national and regional broker dealers though these programs tend to have a much more deft touch and hands-on approach than their wirehouse counterparts. Raymond James offers a comprehensive succession program that not only includes financial opportunity for both the retiring and acquiring advisor, but offers coaching, business planning, and sale and acquisition support to ensure a successful transfer of client accounts. Another example is Janney Montgomery Scott, which offers a similar succession approach through its Advanced Training and Professional Development program. Additionally, Amerprise Financial is a firm with a particularly robust succession program, offering their advisors the resources and support to acquire an external practice through their External Practice Acquisition Program, in addition to their Sunset Program which provides the opportunity for the retiring advisor to receive commissions for up to 5 years – a benefit which is transferable to the adviosr’s beneficiary in the event of death.
With the Raymond James, Ameriprise, and Janney succession programs, financial benefit to the acquiring and retiring advisor and successful transition of client assets within the firm itself are in perfect synergy with the managerial transparency, corporate vision, and growth opportunities which are attracting advisors to these firms in droves.
Which leads us to transition opportunity when balanced with succession opportunity. What if you are an older advisor with a few years left to retirement? Would a move to a new firm partner even make sense given the succession programs that may be available in your current situation? My answer here is a resounding yes given a strategic approach I have coined called DUAL-MONETIZATION(TM). With DUAL-MONETIZATION(TM) the firm type you transition to is irrelevant. You could be transitioning to an RIA, hybrid, independent, or even a wirehouse. In each of these tranition scenarios, DUAL-MONETIZATION(TM) is essentially the construct through which you are able to double your money through both the transition and succession bonuses achieved by making a move. When properly executed at the time of transition an advisor then has the ability to realize upwards of 2 to 3 times the value of their book through DUAL-MONETIZATION(TM).
Ultimately, it is important to recognize that whether an advisor is just starting their career or on the verge of retirement – it is opportunity in the end which will drive their choice of firm partner. Succession planning programs offer such opportunity to both the young and aging advisor and can serve as a vehicle for a firm to provide business and financial growth while fostering longevity in the delicate advisor-client-firm relationship. Further, for the advisor seeking a new situation, DUAL-MONETIZATION(TM) offers an optimal solution through which to capitalize on a lifetime’s worth of work while achieving the benefits a transition to a new firm my offer. In the end, when it comes to succession planning all it takes is a little forethought and strategy on both the part of the firm and the advisor for the success in succession to be realized.