Survey offers fresh look at financial advisors' plans post-retirement
Even though financial advisors are experts at helping clients prepare for the future, a 2018 Financial Planning Association (FPA) research revealed that only 27% of financial planners in the U.S. have a succession plan or any formal preparations to transition their business. And a 2019 J.D. Power study found that the average age of financial advisors is 55, and one out of every five financial advisors is 65 or older.
As a large number of financial advisors approach retirement age, SmartAsset, a platform that matches third-party register investment advisors and investment advisor representatives, conducted a survey of its users to get a more contemporary look at succession planning within the financial planning business.
SmartAsset polled over 460 financial advisors, asking them about anything from their firm's succession strategy to if the COVID-19 has changed how they think about succession planning.
The survey revealed an upsurge in the number of financial advisors having a succession plan. Consistent with the findings of the 2018 FPA survey, it found that 27% of financial advisors have had a succession plan in place for six years or longer.
However, SmartAsset discovered that 38% of surveyed advisers had put in place a succession plan in the previous several years. As a result, almost two-thirds of financial advisors (64.36%) had a succession plan as of February 2022.
Most financial advisors who do not yet have a succession plan aim to do so in the near future. Among advisors without a succession plan, 56% indicated they want to create one at some point in the future. The remaining 44% of advisors (which made up around one in every five of those polled) had no plans to transition or sell their firm and have no intention of starting one.
The poll also revealed most people don't think about succession planning when it comes to financial advisors. Despite the fact that the lack of a succession plan for financial advisors creates a danger to clients, just roughly one-quarter of financial advisors (25.05 percent) claim that clients inquire about their firm's succession plan.
Another part of the survey shed light on whether advisors planned on an internal succession, where someone currently working at the firm would take over; or an external succession, which would involve an outside advisor taking the reins or another external event like a merger or sale of the business.
Across advisors with succession plans, almost 71% said they plan to pass their business on to someone currently working there. Another 11% of advisors said they plant to pass the baton to a family member, and less than 9% said they planned to another firm.
When asked how long they’ve had their succession plan in place, 31% they’ve had it in writing for at least 11 years. Eleven per cent fell within the six- to ten-year range; 28% created their plans three to five years ago; nearly 22% formed theirs one to two years ago; and the rest have had theirs for less than a year.
And while 20% of advisors did succession planning during 2020 or 2021, possibly as a result of the COVID-19 pandemic, 93% of financial advisors said the pandemic did not change how their firm thinks about succession planning.
