Ad­vi­sors are tak­ing suc­ces­sion plan­ning more se­ri­ously, but firms still have plenty to do to meet ad­vi­sors’ ex­pec­ta­tions

Investment Executive - - FRONT PAGE - BY R AMONA LEITAO

Ad­vi­sors are tak­ing re­tire­ment more se­ri­ously these days.

as fi­nan­cial ad­vi­sors age and the fi­nan­cial ad­vi­sory busi­ness con­tin­ues to change, hav­ing a doc­u­mented suc­ces­sion plan in place has be­come in­creas­ingly im­por­tant for ad­vi­sors.

In fact, the re­sults of this year’s Re­port Card series, com­pared with those from 2009, re­vealed just how much things have changed since. For ex­am­ple, the av­er­age age of ad­vi­sors sur­veyed this year was 50.4 years, up from 46.7 in 2009, while the per­cent­age of ad­vi­sors who have a doc­u­mented suc­ces­sion plan in place in­creased even more acutely, to 46.7% in 2018 from 27.3% in 2009.

Fur­ther­more, ad­vi­sors gave the “firm’s suc­ces­sion pro­gram for ad­vi­sors” cat­e­gory an over­all av­er­age im­por­tance rat­ing of 8.7 this year, up sig­nif­i­cantly from the rat­ing of 7.5 that ad­vi­sors gave the cat­e­gory in 2009.

Al­though the ag­ing ad­vi­sor de­mo­graphic is a key rea­son why ad­vi­sors are tak­ing suc­ces­sion plan­ning more se­ri­ously, Ge­orge Hart­man, pres­i­dent and CEO of Toronto-based Mar­ket Logics Inc., points to an­other rea­son: changes within the struc­ture of the fi­nan­cial ad­vi­sory busi­ness and ad­vi­sors’ evolv­ing role, which is lead­ing many ad­vi­sors to con­sider re­tire­ment.

“What’s hap­pened re­cently is that we have, to a cer­tain ex­tent, over­reg­u­la­tion, and many ad­vi­sors are sim­ply fed up,” Hart­man says. “[The ad­vi­sor’s role also is] shift­ing from be­ing a tech­ni­cal ex­pert to be­ing a coach, coun­sel­lor, con­fi­dant, cheer­leader, and so on. And for many ad­vi­sors, this is an un­com­fort­able change.”

How­ever, as ad­vi­sors pay greater at­ten­tion to suc­ces­sion plan­ning, many see sig­nif­i­cant room for im­prove­ment in their firm’s suc­ces­sion pro­grams. Ad­vi­sors gave their firm’s suc­ces­sion pro­gram an over­all av­er­age per­for­mance rat­ing of 7.8. The dif­fer­ence be­tween this rat­ing and the over­all av­er­age im­por­tance rat­ing re­sulted in a tie for the sev­enth-largest “sat­is­fac­tion gap” in the Re­port Card series.

Ad­vi­sors were un­der­whelmed with the struc­ture of these pro­grams and the pay­outs to ad­vi­sors leav­ing the busi­ness. In par­tic­u­lar, ad­vi­sors be­lieve that there is more fo­cus on the profit the firm would gain from selling an ad­vi­sor’s busi­ness than on the needs of the ad­vi­sor’s clients or the fi­nan­cial well-be­ing of the ad­vi­sor selling the book of busi­ness.

“[The suc­ces­sion pro­gram is] held strictly in man­age­ment’s best in­ter­est,” says an in­sur­ance ad­vi­sor in On­tario with Water­loo, Ont.-based Sun Life Fi­nan­cial (Canada) Inc. “I don’t be­lieve the client comes into the con­ver­sa­tion at all. I’ve seen clients [get handed off ] to ad­vi­sors who don’t have a clue.”

“The banks are at­tempt­ing to pay as lit­tle as pos­si­ble to trans­fer [ad­vi­sors’] busi­nesses [and en­sure] high client re­ten­tion,” says an ad­vi­sor in Bri­tish Columbia with Toronto-based BMO Nes­bitt Burns Inc., which is owned by Bank of Mon­treal. “You’re not get­ting paid enough if you use the in-house pro­gram.”

Ad­vi­sors who ply their trade at Canada’s bank branches don’t have the op­tion of selling their books. These ad­vi­sors must rely largely on their bank’s pen­sion plan to fund their re­tire­ment in­come. But re­gard­less of this dif­fer­ence in the form suc­ces­sion plan­ning takes, these ad­vi­sors also be­lieve that their pen­sion plans are not ad­e­quate to pro­vide for a com­fort­able re­tire­ment.

“The amount of pen­sion you re­ceive in re­tire­ment af­ter work­ing so many years in the bank is so lit­tle,” says an ad­vi­sor in At­lantic Canada with Toronto-based Bank of Nova Sco­tia. “And with us con­stantly giv­ing clients fi­nan­cial ad­vice on how to cre­ate a re­tire­ment or pen­sion plan, you would think [the bank] would of­fer more pen­sion to em­ploy­ees.”

Nev­er­the­less, there are some firms that are get­ting the suc­ces­sion pro­gram right. One of them is Mis­sis­sauga, Ont.-based na­tional in­de­pen­dent bro­ker­age Ed­ward Jones, which re­ceived a per­for­mance rat­ing of 9.1 in this cat­e­gory from its ad­vi­sors.

“[The suc­ces­sion pro­gram is] very im­pres­sive,” says an Ed­ward Jones ad­vi­sor in On­tario. “It rec­og­nizes the ad­vi­sor. The pay­out is a lot more lu­cra­tive [than it used to be] — al­most as if you’re selling your own book, but [the pro­gram] saves you the has­sle. It’s not just about the money, though: the firm of­fers limited part­ner­ship with [the pro­gram].”

Says Ann Felske-Jack­man, prin­ci­pal and head of fi­nan­cial ad­vi­sor tal­ent ac­qui­si­tion with Ed­ward Jones: “We ap­proach the suc­ces­sion plan for the ad­vi­sor the same as how we ap­proach ev­ery­thing else in terms of the ad­vi­sor’s sup­port: by put­ting the client at the cen­tre of ev­ery de­ci­sion that’s made, and by let­ting the ad­vi­sor be in­volved in what de­ci­sions are made be­cause they’re the only ones who know their client best.”

Mak­ing sure the client ex­pe­ri­ences a smooth tran­si­tion dur­ing the suc­ces­sion process means plac­ing a pri­or­ity on men­tor­ing and train­ing be­tween the re­tir­ing ad­vi­sor and the suc­ceed­ing ad­vi­sor, Felske-Jack­man says: “The [re­tir­ing ad­vi­sors] have the choice to help us choose their suc­ces­sors. They’ll also have the choice of the time frame for their suc­ces­sion plan.”

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