A Toronto advisor is pointing to a recent case as proof-positive of the need for better succession planning across the industry.
A Toronto advisor is pointing to a recent case as proof-positive of the need for better succession planning across the industry.
“The reality is none of us will live forever, but few want to deal with it,” said Jason Pereira, a senior financial consultant with IPC Investment Corporation. “None of us want to think that we won't make it until 65 but it happens all the time. Our dealership just lost a 50 year old a few months ago and his book got sold at a fire sale discount.”
His comments come at a time when advisors are being cautioned by analysts and regulators alike to diversify their client base outside baby boomers but also to look inward at the makeup of their own offices to ensure clients are protected in the case of a medical emergency. New data suggests the average Canadian advisor is about 58 years out.
John Easton, director of wealth management at Maximizer Software, said as much in an interview with WP, alluding to a case where a 64-year-old man had his entire book in his head, not considering a CRM system or even worse, death. “What if you get hit by a car tomorrow?” he told WP. A valid question.
Pereira also suggests that a major issue for advisors is that they don’t want to even have the discussion of selling their books before their time is up.
#pb#
“Despite a contrary belief, it can be done,” he said.
What he’s doing with his two partners, and what he’s also helping to facilitate for others, is establishing agreements that force an advisor to purchase a partner’s shares with the untimely death of that colleague.
“If anything happens to me, they are obligated as per the partnership agreement to buy my shares of the business at an agreed upon valuation and there is insurance in place to fund the purchase,” Pereira said.
“If all three of us go at the same time (highly unlikely) then my family gets not only the insurance proceeds but also whatever the business gets sold for. I joke with my wife that if I go, hopefully I take them down with me to give her a bigger estate.”
And the model should effectively allow him to tap into a larger book of business, not only from older advisors, but others who he’s been able to consult on this path.
“We are currently working with an individual advisor in her 40s, to be her succession plan,” he said. “We are drafting a document that gives us the first option at buying her book based on a set valuation and also spells out timelines an very basic term.”
