Although the average age of advisors in Investment Executive’s 2007 Planners’ Report Card is 49, only 33% of those polled had documented succession plans in place. It seems succession planning is simmering on the back burner while more immediate concerns get attention.
Nevertheless, advisors acknowledge that having a succession plan is becoming more important. This year, the importance rating of “firm’s succession program for advisors” category received an 8.1, in comparison to the 7.8 it received in 2006.
This is also an indication that change is on the horizon in the financial planning profession. For instance, advisors at Markham, Ont.-based Worldsource Financial Management Inc. say that the firm does not currently have any type of succession program in place (which explains its “not applicable” rating). However, the firm is taking steps this year to ensure smooth transitions. Come fall, it will roll out a succession planning program — entitled Succession and Continuity — as part of its four-tiered training and development program, FRAMEWORKS.
The S&C program is offered in two parts, the first part of which is open not only to Worldsource advisors but to all advisors in the industry interested in attending. This half helps advisors develop and implement a business exit strategy. The second half of the S&C program, available only to Worldsource advisors, is for buyers and sellers and helps advisors with book valuation tracking, sales numbers and financing.
“Advisors definitely want us to help facilitate and educate them and provide them with the tools and resources,” says Andy Mitchell, Worldsource’s president and chief operating officer.
In addition to educating its advisors, Worldsource has a clause in its advisor agreement that says it will purchase the book of business at a premium and pay the advisor’s estate should an advisor die before he or she has an opportunity to sell the business, says Mitchell.
“The firm not only looks after my clients but my family as well, should anything happen to me,” says a Worldsource advisor in Alberta. “A lot of firms just take the book back, but not Worldsource.”
Toronto-based GP Wealth Management Corp. , which scored an 8.3 in the category, doesn’t have any hard and fast rules when it comes to its policies on succession planning. The firm recognizes that every book is different and each situation is unique. As such, it takes the time to understand and address its advisors’ needs.
“I imagine that, over the next decade or so, you’re going to hear a lot more requests for this type of thing,” says George Aguiar. GP Wealth Management’s president and CEO.
Of all the advisors surveyed at GP Wealth Management, 29% of them are aware of the company’s succession plan — and all 29% of them have their own succession plan in place.
Of the Peak Financial Group advisors surveyed, only 57% are aware of the firm’s dedicated transition team. Robert Frances, president and CEO of the Montreal-based firm, points out, “The demand is far less important than we originally thought. It’s not as big as it used to be.”
However, Peak advisors rated the importance of having a succession plan at a high 8.1. Yet only 33% of the firms’ advisors have their own documented succession plan. Perhaps not enough advisors are aware of the presence of Peak’s dedicated transition team.
A Peak advisor in Quebec who is not happy with the firm’s present offering has reached an agreement to direct his own succession plan, and says, “I don’t want the firm meddling in my business.”
In contrast, 81% of advisors at Winnipeg-based Investors Group Inc. are aware of the firm’s succession plan — the highest percentage in the survey. This comes as no surprise to Kevin Regan, executive vice president of financial services, who boasts of the success of the firm’s “long realized, stable program” in which a fully trained advisor works under the wing of a senior advisor. By “spending the time with the incoming advisor and the clients, a smooth transition occurs,” he adds.
“It is a very fair and equitable program. It lets me know exactly what is going to happen,” says an Investors Group advisor in Manitoba who is thinking of signing up for it.
Meanwhile, Burlington, Ont.-based Berkshire-TWC Financial Group Inc. is aiming to facilitate the succession planning process by offering templates of buy/sell agreements. “We have this aging advisory base and the firm that gets it right over the next five or 10 years is going to have the competitive advantage,” says Glenn Pittman, Berkshire’s senior vice president of business development and marketing. IE
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