The average age of advisors is creeping upward, and the financial services industry will need a plan to deal with the inevitable exodus of brokers, planners, account managers and insurance advisors in the next 10 to 15 years.

This year’s Report Cards found the average age of financial advisors is 46, compared with 45 in 2004 and 44 in 2003.

So what’s the plan? It depends who you ask. While the investment dealers appear to be the most successful channel in succession planning this year, with an average rating of 6.4, firms from all channels are still struggling to find a way for advisors to leave the business while the firms retain their clients.

Granted, an exit strategy isn’t exactly top of mind for advisors — not yet, at least. The importance of the succession planning category scored a middle-of-the-road 7.5 average across all channels, creeping up slightly to 7.6 among the oldest advisors.

Yet, advisor retirement isn’t so far off, prompting Investment Executive to ask the top executives at each firm surveyed to share their strategies for accommodating the aging workforce. Their answers ranged from “We don’t have a plan” through to “We know exactly what we’re going to do.”

Falling into the latter category is top-rated brokerage Wellington West Capital Inc. The advisors at the Winnipeg-based firm rated the quality of the company’s succession planning an impressive 8.4, besting the category average for all channels by almost two points. As for the actual “plan” however, it’s not so clear-cut. Chairman and CEO Charlie
Spiring says most brokers receive 1% of their book’s assets when they sell, a valuation that has become the industry standard. If the departing advisor can’t find a buyer, either within or outside Wellington West, the firm will step in with an offer.

Part of the Wellington West’s appeal is that advisors are free to sell their books to whomever they want, although Spiring says most opt to sell within the firm.

“The reality is their books are worth more to a Wellington West broker,” he says. “We have skinny overhead, and our payouts are higher here than they are on the rest of the
Street.” Still, he adds, “We allow advisors to sell to the best bidder on the Street.”

Although Wellington West’s brokers appear to be content with the strategy, it’s too soon to tell how it will pan out. Spiring admits only two brokers have gone through the retirement process to date, and the rest — just like the majority of advisors on the Street — don’t seem “too concerned” about the prospect of retiring.

Toronto-based National Bank Financial Ltd. boasts a series of “relay” programs for advisors who wish to sell either a portion or all of their book for any number of reasons, from early retirement or downsizing to forming a partnership with another advisor.

Senior vice president and managing director Gordon Gibson in Montreal says the program is a perk for seasoned advisors looking to pass along their books as they edge toward retirement, as well as for the rookies looking to grow their businesses through partnerships and book acquisitions. What’s more, with approximately 40% of new talent failing to make it past the first three years in the business, the relay programs give rookies a way to form valuable associations with their more experienced peers.

“We think that if a succession program results in more mentoring and more partnering, we can reduce that 40% attrition rate. And that would be beneficial both to us and to the people we hire,” Gibson says.

In the planning industry, Winnipeg-based Investors Group Inc. and PFSL Investments
Canada Ltd. of Mississauga, Ont., took top marks for succession planning.

Investors Group has mapped out a plan, via its “assured value program,” that pays outgoing advisors the equivalent of two and a half years of trailer commissions. The firm holds steadfast to its philosophy that advisors don’t own the clients and, therefore, can’t exercise the option to sell their books to advisors at competing firms.

Still, Investors Group advisors, who gave their firm a 7.4 rating for succession planning, seem to appreciate the fact they’ll be taken care of when they leave the firm. “It’s easily defined and has a track record,” says Esther Best, senior vice president of the Ontario financial services division. “It really gives people peace of mind.”

@page_break@PFSL’s unique “ownership program” gives advisors who reach a certain level of production and cash flow (defined by year-over-year insurance sales growth) the right to own their own books, at which point they are free to sell to another PFSL rep. The firm then helps advisors to put a value on their books, based on cash flow and factoring in such things as the quality and strength of the business.

Not only does it keep assets within the firm, it enhances employee performance. “It gives advisors something to strive for,” says Jeff Dumanski, executive vice president of marketing at PFSL. IE