Financial planning is all about taking a series of steps well ahead of time to make sure the future unfolds as it should. Many advisors and their firms practise what they preach, particularly when it comes to succession plans.

In fact, as advisors hit their 50s, it is more likely they will have documented succession plans in place. Among the advi-sors over the age of 50 surveyed by Investment Executive for the 2007 Advisors’ Report Card, 38% already have a succession plan in writing, while only 14% under the age of 30 have one. Many in both groups, particularly the latter, say they are still building their books of business and have yet to make plans for succession.

“My plan is to succeed first, then worry about what will happen to my book,” says an Odlum Brown Ltd. broker in British Columbia.

A 74-year-old broker in Atlantic Canada dismisses the idea of a succession plan altogether. He doesn’t need one, he says, as he has outlived almost all of his clients.

But that points to a weakness in the industry: many of the firms don’t push their advisors to make formal succession plans. Of the brokers surveyed, 76% say their firms have documented succession plans, but only 32% of advi-sors in all age groups have formally established succession plans.

Among the investment dealers, many of the boutiques, regional dealers and independent firms prefer to allow advisors to make their own arrangements, with the company acting as an intermediary between the parties.

“We don’t have a documented succession plan,” says Bob Larose, executive vice president of private client services at Vancouver-based Canaccord Capital Inc. “But we do support any deals the brokers make with their colleagues to sell their books of business.”

Other brokerages are very laissez-faire about who buys the retiring advisor’s book, something that appeals to those advisors who plan to have their children succeed them.

FAMILY SUCCESSION

“My son is coming into the business and I want to set him up with my book,” says an Edward Jones broker in Manitoba. “The company just restructured the program for retirement, and it’s excellent now.”

Certainly, the bank-owned investment dealers are trying to accommodate advisors in order to keep client assets in the firm. “We stand in the middle of the transaction,” says David Agnew, managing director of RBC Dominion Securities Inc. in Toronto. “At the end of the day, it is driven by advisors seeking other advisors who would do a good job with their client base. They don’t have to go somewhere else to monetize their business.”

The planning firms are far more scattered when it comes to retirement and succession planning. Mississauga, Ont.-based PFSL Investments Canada Ltd. , for instance, has no concrete succession planning process, says its president and chief marketing officer, Jeff Dumanski.

That’s not unusual. “We don’t necessarily have anything on paper that says, ‘Here’s a document and here’s how it works’,” says Mark Kent, president of Portfolio Strategies Corp. in Calgary, adding that the firm has financed some advisors’ book purchases but only on an ad hoc basis.

And, although 58% of advisors at planning firms say their firms have succession plans, many admit they go it alone. “They have some stuff, but I did my own,” says an advisor with Berkshire-TWC Financial Group Inc. in Ontario. “It is important to think about what will happen to clients when you are gone. You don’t want your book raped and pillaged. You want to make sure it’s a nice fit for everyone.”

It is not as if advisors are demanding documented succession plans from their firms. “I haven’t had anyone ask,” says Ken Rousselle, president and CEO of Professional Investment Services (Canada) Inc. in Markham, Ont. “Most advisors considering succession are in some form of succession plan with another advisor.”

In the insurance industry, 22% of advisors say their firm has a succession plan. Insurance advi-sors have the highest percentage of individual succession plans, at 42%.

“I was one of the first people to start a full succession plan,” says a Hub Financial Inc. advisor in British Columbia. “Ninety per cent of the industry doesn’t have a succession plan — and that’s just insane. I hold seminars to teach people the importance of succession planning.”

@page_break@Several insurance companies own their advisors’ book of business, so there is no structure in place for transferring assets. At Guelph, Ont.-based Co-operators Group Ltd. , district managers work with advisors to find someone within the region to take over their books. “The company takes care of replacements, so we don’t have a succession plan,” says a Co-operators advisor from the West.

Peter Karageorgos, public affairs supervisor at Aurora, Ont.-based State Farm Insurance Cos. , says agents do not own their books of business. When an agent retires, the company selects a replacement.

Some State Farm agents expressed their relief at not having to deal with the time and stress of formulating succession plans. “State Farm owns our books, so when we retire the book just goes back to it,” says a State Farm advisor in the West.

Winnipeg-based Great-West Life Assurance Co. has no formal succession plan but allows advisors to choose their own successors. It only intervenes over compliance issues. “It is a free-market model, whereby our advisors choose their successors and at what price,” says Leander Dueck, senior vice president of individual distribution.

Account managers at banks and credit unions do not usually have succession plans because their companies own their books. Account managers are also employees rather than contracted salespeople, so there are usually pension and stock option plans in place for them when they retire. IE