The financial representative profession is at a crossroads. Arguably, it should be a time of strong growth for advisors, as millions of baby boomers move into a new life stage with new financial needs, insurance and investment products become more sophisticated, and as recent financial turmoil increases client needs.
However, the industry is not growing. In fact, there are fewer advisors; and those who are working tend to be older. In 2005, a study published by LIMRA International found that more than 50% of financial representatives in North America were 48 or older, and 50% of independent producers were 56 or older. Without fresh talent, the industry will not reach its full potential. Indeed, without growth, a healthy future for the industry will be in jeopardy.
The real issue is not recruiting, but retaining bright, young entrepreneurial advisors who can fill the shoes of senior professionals. We need to think outside the box and create an environment that rewards those who build a successful practice. We must take in younger advisors and work closely to bring them along.
Ironically, while many in our industry make a living advising business clients on succession planning, the industry has not done well for itself in this regard. I would suggest that making succession planning work in our industry would do more than just help the elders in our ranks. Done properly, it also can jump-start the industry growth necessary to meet the demands–and reap the rewards–of the current market.
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Granted, career agency systems were not built with succession planning in mind. And they’re not structured to start implementing programs that resemble succession of wealth management operations. In large part, that’s why these programs are not already in place. But encouraging succession planning throughout offices across the country can positively address several problems the industry is facing. So I believe it’s worth looking into what needs to be done for programs to be implemented.
Succession planning requires a process by which senior advisors who intend to retire in 3 to 5 years are matched with younger, entrepreneurial advisors who are looking to learn the business while creating a succession strategy for the senior advisor. Through an introduction by their local network office, the two advisors would spend time together and with clients to see if the match is a fit. If, after a period of time, the fit is good, the younger advisor would buy the book of business.
While this process sounds elementary, our industry has structural idiosyncrasies that make succession planning often difficult to achieve. Nevertheless, the benefits it offers should make it worthwhile. Consider:
Benefits to recruiting and retaining young, entrepreneurial advisors
While it will always take time and hard work to get started in this business, knowing there is the potential to be matched to an advisor, with access to a mentor relationship and an established book of business, could provide the light at the end of the tunnel that so many of our recruits fail to see.
The benefits to the clients
While there are few incentives for senior advisors to give up their clients, it’s the clients who lose out as the advisor becomes increasingly less active. If the potential buyer works closely with the senior advisor for a number of years prior to the transition, this issue can be reduced, if not, eliminated.
The benefits to the senior advisor