A majority of independent registered investment advisors know that their clients expect them to have a succession plan in place, yet most have not planned for the formal succession of their businesses, according to a survey of 500 registered investment advisors (RIAs) released on June 2 by TD AMERITRADE Institutional, a division of TD AMERITRADE Holding Corp.
The quarterly survey found that although the average age of RIAs is over 50, 57% did not have a formal succession plan and 88% did not have business valuation in place. Thirty-nine percent of those surveyed did have a formal succession plan, and 4% were developing one.
Nearly half of those with a plan in place expect to appoint a successor to take over their business, according to the survey, 18% are considering selling the practice and exiting the business or merging with another firm, and 29% had not decided what type of succession option to implement.
Fifty-seven percent of those with a succession plan cited a desire to support the long-term viability of their firm as the reason; 52% said the main reason was satisfying client expectations that a succession plan is in place; 36% wanted to provide a smooth transition into retirement; another 36% said providing continuity for their employees was the reason; and 32% wanted to enhance the valuation of their firm.