Succession planning is becoming ever more important among financial advisors – especially as many are beginning to contemplate retirement. But most of the advisors surveyed for this year’s Report Card series said the succession programs their firms offer either aren’t very helpful or aren’t communicated effectively.
“Having a good succession program is important due to the age of today’s brokers,” says an advisor on the Prairies with Toronto-based BMO Nesbitt Burns Inc. “They’re like western Canadian farmers, for whom the average age is mid-50s or 60s.”
Even though the average age of the 1,683 advisors surveyed for this year’s Report Card series is not quite that high, it is increasing. Today, that average age is 48.9 years, whereas it was 46.7 years in 2009. In tandem with this overall rise in average age is an even greater increase in the overall average importance rating advisors gave to the “firm’s succession program for advisors” category, which was 8.7 this year vs 7.5 in 2009.
Although advisors who were surveyed said that succession planning is becoming more and more critical, they also pointed out that their firms’ efforts in this category are sorely lacking. There were various reasons for this, but the advisors most dissatisfied with their firm pointed to several concerns regarding the succession program, such as: there’s no autonomy regarding whom they can sell their book to and there’s inconsistent support with the transition and valuation of a book of business.
“There’s no consistent valuation model for the transition of a book of business that the firm is willing to put on paper,” says an advisor in British Columbia with Toronto-based TD Wealth Private Investment Advice, which received the lowest rating (6.0) for the category among the brokerages. “There’s way too much subjectivity to it. The price of your book can turn into a beauty contest.”
“Often, they just want to help who they want to help,” adds a colleague in Ontario. “I had a verbal agreement with a broker who was retiring to buy his book. It was rubber-stamped, ready to go – and the manager and the firm stopped it. They forced him to sell his book to someone he didn’t want to.”
Other advisors who gave their firms low ratings in this category reported a lack of communication regarding how their firm’s succession programs works. For example, several advisors with Lévis, Que.-based Desjardins Financial Security Independent Network, which received a rating of 7.0 in the category – tied with Markham, Ont.-based Worldsource Wealth Management Inc. for the lowest rating in the category among the dealer firms – felt they were left to their own devices.
“I’ve sent emails saying I want to talk about [succession planning],” says a Desjardins advisor on the Prairies, “and they didn’t respond to any of them.”
In fact, several colleagues added they were unsure if Desjardins even has a succession program and, as a result, they were preparing their succession plans on their own.
But it appears that there’s a disconnection between Desjardins advisors and their firm, which offers a full succession program with significant assistance, according to Shawn Smith, Desjardins’ vice president, sales and distribution, individual network, in Toronto: “We have planning, financial and accounting [support]. [We work] with the individual advisors and the managing director of the financial centres they’re with to figure out the right kind of support [advisors need]. We will even identify candidates to take over their books of business.”
The firms that had the highest performance ratings in the category were praised by their advisors for communicating regularly and offering advisors support whenever they needed it – while still leaving the ultimate fate of the books up to the advisors. These firms also put significant focus on building up the next generation of advisors who will take over these businesses.
“[The firm] supports your goals and doesn’t dictate what to do with your book,” says an advisor in B.C. with Calgary-based Leede Financial Markets Inc., which received the highest performance rating for succession programs (9.7) in this year’s Report Card series.
Leede also ensures that younger advisors will be well prepared to inherit the books of its older advisors through its mentoring program, through which senior advisors meet one-on-one with younger advisors on an ongoing basis.
“I was out for a long lunch with one of our 20-something advisors,” says Robert Harrison, Leede’s president and CEO, of an example of the mentoring program in practice. “I suggested a few things that happened to me, and what was successful for me and what wasn’t. It’s an ongoing mentorship.”
Waterloo, Ont.-based Sun Life Financial (Canada) Inc., which was rated 9.2 in the category, takes a different approach by removing the stress of having advisors find successors altogether. The firm guarantees it will buy its advisors’ books – and transfer each to a suitable successor.
“Within our system, Sun Life is the guaranteed buyer; we’re actually the middle person, as we facilitate that process,” says Vicken Kazazian, senior vice president of Sun Life’s career sales force. “So, we’re very much involved if an advisor is planning on leaving the business. We facilitate the process whereby another advisor actually buys that book from the [retiring advisor].”
Says a Sun Life advisor in Atlantic Canada who just inherited a retiring veteran’s book: “I took over senior advisor’s book, and [the process] was smooth. There is a guy dedicated to that, and it happened over a three-year period.”
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