More than one-quarter of financial advisors planning to retire within the next decade still lack a clear succession plan, according to Cerulli Associates, and as reported by AdvisorHub.
Cerulli estimates that 35 percent of advisors, representing approximately 40 percent of the industry's client assets, will retire during the next decade. The consulting firm recommends that advisors place greater emphasis on developing junior advisors who can eventually assume responsibility for their practices.
Talent development remains a significant obstacle. Roughly three-quarters of practice management professionals surveyed by Cerulli identified the time required to learn the business as a major challenge, while 67 percent cited the time required for day-to-day training.
The challenge affects firms of all sizes. Smaller RIAs often lack the resources and formal training programs needed to develop new advisors, while larger firms also face difficulties retaining trainees. Cerulli reported in 2023 that more than 72 percent of novices left the industry before completing their training.
According to AdvisorHub, some firms have begun changing their approach to training. Merrill Lynch executives have said that moving away from a sink-or-swim model and recruiting candidates with some financial background, including employees from its consumer bank, could improve its trainee graduation rate.
Cerulli recommends placing new advisors on established teams and creating long-term development plans that allow them to assume greater responsibility over time. This approach can also help clients become familiar with a potential successor before the senior advisor retires.
According to AdvisorHub, firms further can attract qualified candidates by providing a clear career path and opportunities to take responsibility for portions of a client book. Although senior advisors may give up some revenue in the process, the strategy can help establish a succession plan well before retirement.
Financial Advisor Transitions consults with advisors nationwide regarding employment transition options and strategies to preserve and protect their practices during any transition.
