The RIA industry is on the cusp of a surge in transition activity, but 57% of advisors in a survey released Monday said transition to next-generation leadership would be bumpy or worse, with a few acknowledging that there was no qualified candidate within their firm.
DeVoe & Co., a consulting firm and investment bank, conducted the survey between November and January among 118 senior executives, principals or owners of RIA firms ranging in size from $100 million to more than $5 billion in assets under management.
For larger RIAs, those managing assets between $750 million and $1 billion, the situation is even more critical. Eighty-seven percent of these firms said passing the baton to the next generation would be bumpy or face significant challenges.
According to the report, individual firms and the industry as a whole will suffer if active coaching, career path development and leadership planning are not implemented.
“Succession planning is more akin to a journey than an event,” David DeVoe, the consultant’s founder and chief executive, wrote in the report. “Advisory firms that start this process and commit to ensuring their G2 is positioned to run the firm will have a greater set of options and a more secure path forward.”
Performance management is essential for building a motivated team focused on shared goals, the report said. Yet 65% of RIAs surveyed reported that they conducted performance reviews only once a year or less, if at all.
This means that employees are often unaware of performance gaps, and may even be focused on outdated goals, according to the report.