Why So Many RIAs Are Dropping the Ball on Succession Planning

With more than 18,000 financial advisors retiring in the next 5 years, you would think that more of them had a succession plan in place. According to a Charles Schwab study done in 2014, only 49% of RIAs “have a formalized succession plan in place.” There has been a big push from within the financial industry to encourage financial advisors to create and implement succession plans for their retirement, and it’s something that is (slowly) being embraced by more independent advisors.

But where does the hesitation about succession planning come from in the first place? Why aren’t the people who are so good at helping others plan for their retirement better at planning their own? Here are some of the most common reasons financial advisors are avoiding their succession planning needs.

It forces them to face a difficult decision.

Putting a succession plan into place forces a financial advisor to make a decision about their retirement, and it’s not something many people are ready to think about five or ten years before it happens. Making the tough choice about when to retire is the first step in making your succession plan, and it’s an easy choice to delay.

There is fear about retiring.

Some financial advisors simply aren’t looking forward to retirement yet. They are passionate about what they do for a living. Financial advising becomes more than a job to many in the industry; it becomes an identity. Giving that up is tough, even if you’ve promised your family you’ll cut back on your hours and spend more time at home.

It’s easier to do nothing than doing something.

It’s a simple law of inertia. It’s easier to stay still than it is to get moving. Not making these plans is simple; you can ignore them for a long, long time before it becomes an emergency. And while financial advisors know this is the same attitude that gets their own clients into trouble, it’s an easy attitude to adopt.

It’s tough to find the right partner.

Many succession plans require you to find the right partner to help you execute your plan and take over your book. If you can’t find someone suitable, it’s hard to get motivated about moving forward. Fortunately, this is more often an excuse than a fact, because there are plenty of suitable succession planning partners to be found.

Facing your own mortality isn’t fun.

Succession planning is acknowledging that you are getting older and can’t work forever, despite what you might tell yourself. It forces you to face the facts that at some point you are going to have to leave your business or at least taper back your involvement. No one wants to think about it, but it’s something that we all need to face.

Having trouble getting started on your own succession planning? We can help. Let our team help you put a formalized plan into place and start executing it for your own benefit and the benefit of your clients. Get in touch with advisorRETIRE™ today.