4 Keys to Succession Planning

What You Need to Know

Nearly 40% of today’s advisors plan to retire in the next 10 years, Cerulli reports.
Succession planning is highly personal to each advisor and, in many cases, very complex.
The objective is to secure the highest value of the business while transitioning from it.

It’s no secret that the financial advice industry doesn’t have the best track record when it comes to succession planning and preparation.

Numbers suggest the situation is becoming more pressing by the day, with some estimates revealing that nearly 40% of today’s advisors — representing more than $11 trillion in assets — plan to retire in the next 10 years, according to The Cerulli Report — U.S. Advisor Metrics 2023. Despite the acceleration toward retirement en masse, many advisors don’t have a plan to protect and monetize the value of their business while realizing its ultimate value.

Simply put, proper succession planning can protect the enterprise value advisors have created in their business, while lack of planning often has the opposite effect.

At Cetera, we have facilitated hundreds of advisor-to-advisor transactions as well as nearly 100 acquisitions of various sizes. We have been working to support advisors in these areas for years and continue to invest in resources to provide greater optionality for our advisors. We see all too often what happens when a succession plan is not well defined and documented.

In our experience, succession events occur in two broad categories. The first is the more commonly discussed, traditional definition that likely comes to mind most often when “succession planning” is mentioned: as an expected exit.

The second, lesser-talked-about event, is equally, if not more important: an unexpected exit, also known as continuity planning. Unexpected exits are the ones we don’t like to talk about, but ultimately, life happens, and advisors should be prepared. When it comes to unexpected exits, advisors owe it to themselves, their family, their partners, employees and clients to plan for how their business will transition to new ownership when they are no longer involved.

In the unexpected exit scenario, the consequences of lack of planning can be extreme. Advisors who don’t have a plan to protect their business could lose its entire value and force their families to attempt to address the transfer of value of the business that they are unprepared and inexperienced to deal with. In addition to the grief around losing someone too soon, the complexity of transferring value to your family becomes exponentially more difficult without proper written plans.

When evaluating succession planning partners and resources, keep these four considerations in mind as critical components of a strategic and thoughtful succession plan. Regardless of where you are in your professional lifecycle, it’s never too early to start seriously thinking about succession planning.

Doing so with a partner who can deliver choice, flexibility, timing and control will increase your chance of success and can help ensure that you realize the highest value of your business while transitioning it in a way that is best for your clients, family and business.