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Are Advisors Failing at Succession?

According to a new white paper by SEI and FP Transitions, most financial advisors think they have built a business, but what they have really built is a practice that’s likely to end when they retire. Their research shows that a stark 99% of independent financial services and advisory firms go out of business when their founders retire. That’s the hallmark of a practice, not a business.

By envisioning the future in the present, advisory firms will have a better picture of their firm’s current health, be more likely to find the next generation of advisors and send a strong message to clients, along with creating a retirement plan for the founder and heirs.

Of the 771 firms polled, one-third claim to have a succession plan, but just 17% have an actionable and binding agreement. Valuation estimates span from one to four times last year’s revenue. One-third have never acquired another practice but say they plan to, and another third plan to bring in younger advisors. Do you have a binding and actionable succession plan?

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