Wising up to succession planning

Advisors’ procrastination in preparing succession plans may be the result of a culmination of factors, but a common thread is that advisors are reluctant, sometimes unwilling, to retire. “[The business] is in their blood,” says Robert Harrison, president and CEO of Calgary-based Leede Financial Markets Inc. “Brokers don’t retire. They usually slump over their desks at about the age of 83.”

But many advisors recognize that having a documented succession plan in place is, as an advisor in British Columbia with Toronto-based RBC Dominion Securities Inc. (DS) says: “A win/win [situation for both advisors and their firms.] They want to try and retain as many clients as possible. There is a good payout for advisors on both ends [of the transaction].”

In fact, the firms that were rated highest in performance in this category offer advisors both a greater say in the process and flexibility, which benefits both advisors and the firm. Leede, for example, received a survey-high rating of 9.7 for allowing its advisors to call the shots and for management’s strong support in the process.

“[Management] supports your goals and doesn’t dictate what you have to do with your book,” says a Leede advisor in B.C.

Adds a colleague in the same province: “A lot of it is up to discretion – and I’m satisfied with this.”

Similarly, Toronto-based Richardson GMP Ltd., which was rated at 9.2 in the category, relies on a customized, collaborative process between advisors and the firm when preparing succession plans. Andrew Marsh, the firm’s president and CEO, says Richardson GMP emphasizes a tailored approach for each succession plan: “We do [succession planning] one on one. We don’t have a template approach because we don’t live in a template world.”

And, thanks to that firm’s boutique culture, in which advisors are equity partners, Richardson GMP doesn’t let advisors slip through the cracks when it comes to planning ahead, Marsh adds: “We’re aware of those that don’t have a succession plan in place and we have objectives for our branch managers to make sure that we’re having conversations with them. Lack of a succession plan puts that value to the partnership at risk; and with a succession plan, the partnership is protected.”

Part of protecting the partnership is having a culture in which a team-based approach is encouraged. As a Richardson GMP advisor in Ontario puts it: “They are a big proponent of teams to facilitate book inheritance.”

DS is another firm that has seen success with advisors adopting a team-based approach to succession planning. “We’re seeing some larger practices,” says David Agnew, DS’s CEO and national director, “in which [advisors] are now [transferring the book] not to one advisor but to two or three advisors, which provides great consistency to the client in terms of uninterrupted service levels and investment discipline.”

And having a documented succession plan also helps advisors and their clients. “For clients to know I’m passing on my business is extremely positive,” says a DS advisor in Ontario. “It’s also a huge marketing bonus [for me] when I can talk about having a plan and most advisors can’t.”

Although some advisors are ecstatic with the succession programs that their firms provide, others are less than enthused. Most notably, advisors with Toronto-based TD Wealth Private Investment Advice (TD Wealth PIA), ScotiaMcLeod Inc. and BMO Nesbitt Burns Inc. continue to rate their firms lowest in this category, with all three firms’ performance ratings declining by half a point or more this year. Advisors expressed frustration with both the lack of communication and the low level of formality and preparation in their firms’ approach to succession planning.

An advisor in B.C. with TD Wealth PIA, which had the lowest performance rating in the category, at 6.0, notes the absence of clear guidelines: “There’s no consistent valuation model for the transition of a book that they’re willing to put on paper. There’s way too much subjectivity to it. The price of your book can turn into a beauty contest.”

The firm intends to make changes to its succession program, says Dave Kelly, president and national sales manager, who notes that a new legacy program focusing on retirement and succession planning is in development and is expected to launch by mid-2014.

Details of this program still are being hashed out. However, Kelly says: “What’s new is that we will have drivers over and above the revenue on the book that will contribute to the value of a top-up payment.”

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