Here’s an eye-popping prediction: more than 500 fee-only financial advisors will sell their practices over the next five years, according to Tiburon Strategic Advisors in Tiburon, California.
In mid-April, Tiburon released an updated version of its research report, “A Comprehensive Overview of Succession Planning, Firm Valuations & the Growing Acquisition Market for Financial Advisors.” The report found that because of the “explosion” in the number of independent advisors–fee-only and independent reps–succession planning has become a critical issue for them. More than half of fee-only advisors–27%–plan on selling their businesses when they retire, with the majority of sales going to a partner or an employee, the report says. Twenty-one percent of independent advisors plan to sell to an institutional buyer, while 5% will sell out to a competitor.
Those advisors managing greater amounts of money are more likely to have a succession plan than their smaller brethren, the report found. Those advisors looking to sell their businesses are also getting younger. In 2003, 51% of advisors that listed their practice on Business Transitions’ Web site were less than 50 years old, Tiburon says. Only 26% of the sellers in 2000 were of the same age.