A growing priority for aging advisors

An advisor in Ontario with Toronto-based RBC Dominion Securities Inc. sums up the current industry need: “As the population ages, firms need to transition and get young people in to take over older advisors’ businesses.”

There remains a gap in communication, as many advisors admit to not knowing what their firms offer in this area. But an increasing number of advisors say that as they age, they are looking more closely at their firm’s succession plans — and many of them are happy with what they see.

For instance, advisors who rank their firms highest in the category say their dealers have succession programs in place that allow flexibility and have financing options.

“They are flexible and help construct the right deal for both departing and acquiring advisors,” says an advisor in Ontario with Toronto-based Raymond James Ltd. “It’s not a cookie-cutter deal.”

“It’s a complete program,” adds a Raymond James advisor in Alberta. “The firm helps finance and groom the successor, offering the successor a loan, interest-free, if it’s paid off in two years.”

Terry Hetherington, executive vice president and head of the private client group at Raymond James, adds that the structure of the firm’s succession plan ensures a smooth transition for the firm, advisors and their clients.

“We like to think of it as a win/win/win situation, in that the client has some continuity in the transition period,” he says. “For the advisors selling their books of business, one of the obligations is that they stick around for a brief time and that all the clients would meet their new advisor and get very comfortable with that new advisor.”

Meanwhile, Toronto-based Richardson GMP Ltd. has been working on creating a new succession program since the merger between its two predecessor firms, Richardson Partners Financial Ltd. and GMP Private Client LP, this past autumn.

“We’ve reinvented everything in the past few months,” says James Werry, CEO of Richardson GMP. “We have not rolled out the new plan to our advisors yet, but they know it exists.”

Under the plan, the firm would help advisors sell their books; in addition, they would also continue to own a piece of the organization in retirement. “From an advisor standpoint, that’s very valuable,” Werry says. “When they retire, they can keep that equity stake.”

Although Richardson GMP’s succession program is still highly rated, it dropped to 8.6 vs last year’s combined average rating of 9.0 for Richardson Partners and GMP.

A part of the reason is that some advisors have expressed concerns about lack of communication in regard to the plan, as most say they are unaware of what it fully entails. However, those who are aware of the new succession program say it’s an improvement from the past.

“There’s a more defined process and evaluation of a practice at the end,” says a Richardson GMP advisor in British Columbia.

Richardson GMP advisors, much like their industry brethren, say succession planning is becoming more important, as they rated it 8.6 in importance this year vs an average of 8.3 in 2009.

This trend, reflected in the overall numbers, could be a reason why 23.4% of advisors surveyed say they have a documented succession plan in place. Although the figure may seem small, it was an increase from 19.7% last year.

This increase, combined with rising ages and higher importance ratings for succession programs, may suggest why advisors with Toronto-based BMO Nesbitt Burns Inc., Montreal-based MacDougall MacDougall & MacTier Inc. and Vancouver-based Odlum Brown Ltd. rated their firms higher this year by at least half a point vs 2009.

The average age of Nesbitt advisors increased to 48.6 years from 45 years in 2009, while the average age of advisors at 3Macs increased by a similar margin, to 49.7 years vs 46.4 in 2009. The average age of advi-sors at Odlum Brown has remained stable, but the percentage of those with a documented succession plan in place has increased to 8% from zero the previous year.