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November 14, 2011 at 07:39 AM
More advisors are developing a formal succession plan, with most saying they will name an internal successor, according to a survey released Monday by TD Ameritrade Institutional.
TD Ameritrade’s quarterly survey of 502 RIAs found that 62% of advisors say they have or are in the process of developing a succession plan, up from 43% in 2010.
George Tamer (below), director of strategic relationships for TD Ameritrade Institutional, says that because the average age of survey respondents was 54 years, “there is clearly an immediate need for formal succession planning.” TD Ameritrade, he said, is “encouraged by the survey results which show advisors are taking steps to create formal succession plans.”
Top reasons for creating a succession plan, the advisors said, are satisfying client expectations (66%), supporting the long-term viability of the firm (51%) and providing a smooth transition into the advisor’s retirement (49%). Advisors nearing retirement say difficulty identifying an internal successor (53%) and lack of time to develop a succession plan (21%) were top reasons they don’t have a plan in place.
They survey also found that finding an internal successor is the preferred exit strategy for half of the advisors polled followed by selling the practice (11%) or merging with another firm (8%). Nearly a third of advisors who report having a succession plan have not decided which succession option they will implement.
When asked who they would choose to run their firms, nearly half of the advisor polled said they would pick current employees while 42% said they would recruit from another advisory firm. RIAs are also looking for leaders in other professions (24%), recent graduates (20%) and career changers (16%), the survey found.
Advisors also say when looking for a successor they will value client service and communication (67%), relationship building (51%) and business development (48%) over technical financial planning (36%) and management skills (22%).
The survey found that advisors were split on whether the industry is facing a talent shortage, with 44% agreeing and 56% disagreeing. However, two-thirds of advisors said they wouldn’t be hiring in the next 12 months.
