Effective succession plans for the owners of financial advisor businesses tackle a long list of challenges that directly affect three distinct but interdependent groups of stakeholders — the business creators, the next generation of leadership and their shared clients.
Well-crafted plans are associated with happier advisors and higher business valuations, experts agree, but the industry is known for investing too little time and effort on the succession question. The aging business-owner population, if follows, is rushing toward retirement with no clear off-ramp, while potential successors often believe that their needs aren’t being met.
These warnings are among the key findings of a new succession planning report published by Kestra Financial.
At its core, the report suggests, succession planning is about choosing people who not only will guide the firm into the future but also uphold the high standard of care that clients have come to rely on. To that end, the researchers took a qualitative and quantitative look at what’s working — and what’s breaking down — as advisors navigate passing the torch.
“What we found was a story of good intentions undermined by misalignment,” the authors warn. “While owners and successors each have a vision of opportunity, they often operate with different assumptions and unclear expectations.”
Owners tend to feel cool and confident, according to the report, while many intended successors feel undervalued and uncertain.
“In an industry facing a scarcity of next-generation talent, that’s a risk no firm can afford,” the authors conclude.
See the accompanying slideshow for highlights underscoring the gaps threatening successful successions.
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