Lack of 'natural pathway' for generation of advisers

Craig West Succession Plus SUCCESSION PLANNING

9 June 2021
| By Laura Dew |
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The reluctance of business owners to sell their advice firms is leaving a generation of advisers unable to progress, according to Succession Plus.

Many owners were now working into their advanced years which meant there was “no natural pathway” for younger members of staff to take over the business.

Speaking to Money Management, chief executive, Craig West, said when advisers did eventually sell-up, they were often skipping a generation in their 50s and going directly to those younger staff in their 30s.

West said: “We are seeing people working until their 80s, they are in no rush to sell up. They are loyal to their clients and stay too long which makes succession planning difficult.

“There has been a dramatic change, 10-15 years ago, it was about selling the business, now baby boomers are already wealthy so they are less reliant on the sale and money is no longer the goal. They want to be able to keep staff and clients and leave a legacy, that is their number one outcome now.”

As a result, many advisers of in their 50s were leaving firms and setting up on their own but the costs of compliance meant this was not always a viable option for everyone. Others were leaving the industry and choosing new careers altogether to avoid taking the Financial Advisers Standards and Ethics Authority (FASEA) exam.

“When they do sell up, a generation is skipped and there is no natural pathway for younger members of staff. Then it has to become an external sale which is more difficult and a harder transition for clients,” West said.

“There are people aged 65-70, then people aged 35-40, it is the generation aged 50-55 who are missing out and they don’t get the chance to take over the business, they are missing out completely.

“So then they don’t want to wait and end up taking their clients and setting up themselves which is something we are seeing more frequently.”

In light of this, he said an option for firms was to set up an employee succession ownership plan which enabled staff to buy the owner out over time which created a gradual transition and let staff feel invested in the business’ future.

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