Succession planning is increasingly important for firms and their advisors. But managing the process is difficult: advisors with their sights set on retirement want a good return when selling their books of business; young advisors often need to borrow to buy those books; firms are anxious to retain the departing advisor’s assets; and clients want to continue to receive the level of service they have come to expect.

But succession planning is still a relatively new area, and there is little consensus on the best approach. Some dealers are developing formal programs and formulas for valuing books, and have guidelines for the transition. Other dealers say there are so many differences among practices that it’s best to offer general support and financial help but avoid specific rules.

But, despite the differences in approaches, there certainly are successes. “I’ve used the firm’s succession program to help facilitate the transfer of a book from one investment advisor to another,” says a branch manager from the Prairies with Toronto-based RBC Dominion Securities Inc. “I try to hire IAs who can buy books. It’s a benefit to IAs.”

Adds a Hub Financial Inc. advi-sor in Ontario: “I submitted my succession information in advance and [the Woodbridge, Ont.-based managing general agent] guided me toward a succession plan through advice and seminars.”

But if advisors are meting out awards, they also have complaints; the most common one is that their firms don’t put a high enough value on their books. “The firm doesn’t give a clear number,” says a BMO Nesbitt Burns Inc. advi-sor in Ontario. “If I die, I still don’t know what my wife would get. The arbitrator, my branch manager, is in complete conflict of interest.”

A Nesbitt advisor in Alberta adds that the brokerage’s succession program doesn’t reflect the changing realities of the business. “It’s still geared toward the older, ‘one broker/one book’ team,” he says, “instead of multiple-broker teams.”

Still, advisors in Investment Executive’s four Report Cards did find reasons to praise their firms.

Advisors with Mississauga Ont.-based mutual fund dealer PFSL Investments Canada Ltd. — who gave their firm a 9.5 rating in the succession category — like PFSL’s automatic process whereby the book of a departing advisor moves up to the advisor’s manager. But PFSL does allow advisors to arrange for their businesses to go to a spouse or family member; as well, advisors above a certain level of seniority can sell their books.

Montreal-based full-service dealer Peak Financial Group garnered a 9.0 rating from its advisors. The firm doesn’t have a formal succession program, but it does provide some payment guarantees to advisors who sell their books and helps acquiring advisors finance their books. Peak also prepares documents, monitors transactions during the first month of a succeeding advisor’s tenure and trains assistants.

Toronto-based brokerage Richardson Partners Financial Ltd., which received a rating of 8.9, provides a platform for buyers and sellers to restructure practices. But, says Richardson Partners president and CEO Sue Dabarno: “Nothing’s cut and dried because client relationships are not cut and dried.”

Richardson Partners also allows advisors to continue to hold some ownership post-retirement, which, Dabarno says, is something advi-sors like because they often want to stay involved with some clients in their retirement years.

DS, whose rating in the category was an 8.5, also offers an option to stay involved. In addition, it matches buyers and sellers, sometimes well in advance of an advi-sor’s retirement. “If an advisor is not in a large branch,” says David Agnew, the firm’s national director, “he or she will often come to senior management and myself to say, ‘I’m looking for someone to be my ultimate successor.’ Whether it’s five or 15 years down the road, we then hand-pick someone.”

Among the life insurers, the succession planning programs of Waterloo, Ont.-based Sun Life Financial (Canada) Inc. (8.1 rating) and Winnipeg’s Great-West Life Assurance Co. (7.8) ensure retired advisors receive commissions on existing policies for a specified period. Conversely, Guelph, Ont.-based Co-operators Group Ltd. (7.5) and London, Ont.-based Freedom 55 Financial (6.8) lack such programs.

Chris Reynolds, president of Mississauga, Ont.-based mutual fund dealer Investment Planning Counsel, maintains there is much demand from younger advisors to purchase books that it has become an auction process. In the Greater Toronto Area recently, there were about 30 bids for one book.

@page_break@And when Ottawa-based mutual fund dealer Independent Planning Group Inc. held its succession planning workshops over this past year, they all sold out. IE