Technology’s Growing Role in FA Succession Planning

Financial advisor succession planning remains subject to process bottlenecks that technology can increasingly address


For years, industry pundits have been sounding the alarm:  The number of financial advisors at or near retirement age is outpacing the number of new financial advisors entering the profession.

Indeed, the Certified Financial Planner Board of Standards recently reported that there are more advisors over 70 than under 30.  All of which, for many industry experts, begs the following question:  Who could possibly take over this massive amount of business as the waves of retiring financial advisors intensify in years to come?

But maybe this is an industry-wide issue that some firms are already starting to quietly solve.

At least, that’s the perspective of LaSalle St. Senior Vice President, Business Development Mark Contey.  Contey suggests that, in recent years, advisor retirement has started to play a much larger role in advisors’ discussions with his firm around recruitment and affiliation.

Aligning FA recruiting with FA retirement

“Interestingly, younger advisors looking to take advantage of the wave of a impending retirement to quickly grow their businesses are driving this conversation,” said Contey. “They see having a stable, straightforward partner provides significant value as they seek scale by purchasing a soon to be retiring advisor’s book of business.”

Contey notes that succession planning and access to retiring advisors’ books of business now constitute 70% to 80% of his recruitment conversations in the past few years.

“Advisors understand the opportunities and risks associated with the potential wave of advisor attrition through retirement or career change. This is a notable change from recent years when succession planning was lower on the list of priorities and only represented maybe 30% to 40% of conversations at the time.”

While the industry may now be talking about this more seriously, what role does technology and what solutions will support this massive transition?

Getting out of your own way

Todd Fulks, senior vice president of Succession & Acquisition at Advisor Group explained that technology enables advisors with ways to prepare for this process. But often, the improper utilization of these tools can create significant stumbling blocks for advisors looking to buy or sell a book of business.

One such example Fulks cites is when a seller maintains an out-of-date customer relations management database.  This can negatively impact the due diligence, the valuation of the business as well as client transition and retention.

“Not having systems and processes in place to streamline workflow that can easily be learned and transferred to a buyer becomes a hurdle for sellers,” he continued. “A buyer who does not have an efficient way to onboard hundreds of clients very quickly through some type of online account opening tool can bottleneck client transition, create a poor client experience and create client retention problems.”

Many of these stumbling blocks can be addressed through the use of a range of digitalization tools on the market, including the Advisors Transitions Program from Docupace and CogniCor’s AI-enabled digital assistants, among many others.

Quite simply, Fulks notes, an independent financial advisory practice that is not digitally enabled is at a meaningful disadvantage when marketing itself for sale.

Show me the money

In somewhat of a cosmic contradiction, financial advisors, who spend a vast majority of their professional lives planning clients’ retirement, rarely put into place a meaningful and capitalized succession plan to support their own retirement.

The AmeriFlex Group, an advisor owned, hybrid RIA based in Las Vegas, announced a new program called SuccessionFlex and its first cohort of participants last month that aims to address this problem. The firm announced the payout of $8.065 million to nine financial advisors as part of this program created to address certain risks and uncertainties around succession planning for financial advisors planning to retire within five years.

According to the firm, participants in the first SuccessionFlex group are mostly in their mid-to-late 60s and taking their first steps toward “the next phase of their professional lives.”

“Our program allows advisors to start their succession journey, keep control and continue to build their business – so the participants need continued access to best-in-class technology,” explained Tom Goodson, CEO and President of The AmeriFlex Group. “Yet those within five to ten years of retirement tend not to want to change their operational models significantly.”

“By shifting our relationship from the back-office to the near-office and providing additional planning, technology and administrative support to these practices, we enhance the client experience and position our advisors to continue to serve these clients when the original advisor chooses to leave,” he said. “This approach ensures a seamless transition for all parties.”

In most situations, technology is an afterthought for the advisors taking part in these transitions, Goodson said.

“Our advisors and those choosing to join us through SuccessionFlex want to be sure their clients will be well served. A strong, easy-to-use and secure tech stack represent a critical foundational level of that service – but strong relationships between our team, the advisors and their clients, along with the ability to maintain control during the succession process, are the two most important aspects of this program and the ultimate transaction.”

Data and analytics remain central

For advisors looking to make the plans for a complete and immediate exit, access to an analytics system that can help an advisor understand the strengths and weaknesses of their practice allows the advisor to better plan and prepare for this transition and transaction, explained Advisor Group’s Todd Fulks.

“Access to reliable and real time data about what is happening in the marketplace allows an advisor to make the business more marketable, transferrable and more valuable.”

Advisor Group offers its affiliated practices access to its Business Valuation & Analytics Assessment tool. This program uses a market-based valuation approach to produce the most up-to-date and accurate valuation in the industry, according to the company.

“Using this type of technology for benchmarking and understanding key performance indicators is important. Combining this with expert consulting on how to use this information to enhance a business and a succession plan becomes powerful,” explained Fulks.