Evidence is emerging that dealer groups around the country are struggling to find replacements for retiring regional planning practice principals and are abandoning them for lack of a solution.
Chief executive of adviser practice sales company Kenyon Partners, Paul Tynan said dealer groups throughout the country were finding it extremely difficult to replace regional practice principals, and the problem had resulted in some groups abandoning the principal to fend for themselves and find a replacement.
Some dealers had been forced to buy the practice as a buyer of a last resort scheme and were using salaried employees as a stopgap measure to service clients while they looked for a replacement, he said.
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"No-one can put their hand over their heart and tell me that a salaried person can service a client base better than a self-employed person. It doesn't happen that way," Tynan said.
Some dealer groups haven't been able to find a replacement within the dealer group and have come to him to find a buyer in the open market, he said.
The problem is only going to get worse as the baby boomer generation retires, Tynan said.
John Birt of Radar Results said he was already seeing dealer groups who couldn't even find planners in the open market to take over a regional planning practice.
It took approximately two years to find a replacement for one regional planning practice, compared to around six months for most transactions, he said.
The Future of Financial Advice reforms would make the number of advisers in the industry plunge even further from 16,000 to 10,000 in the next few years, Birt said.
There was already a shortage of planners in most capital cities, he said.
Both dealer groups Capstone Financial Planning and AMP blamed poor planning for the failure of some dealers to find replacement principals for regional areas.
Capstone national network manager, Jaime Johns said succession planning should start five years before retirement, while AMP director of financial planning, advice and services, Steve Helmich said that in extreme cases a succession plan could run between five and 10 years.
Capstone has a wide regional network of advisers in Victoria.
Many regional principals only started thinking about succession two years out of retirement, and that wasn't a good timeframe in which to manage a transition, Johns said.
"What you tend to find is they have to rush the sale, and then they jeopardise their business and flexibility to transition," she said.
AMP has to think more broadly to find a replacement for regional practices, and has in the past recruited accountants to become the takeover advice principal, Helmich said.
The length of transition depended on what kind of handover the adviser wanted and what was best for the clients, he said.
