NFP Poll: More than 4 in 10 Advisors Lack an Exit Plan

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Among advisors who are within two years of transitioning their practice to a successor, just over four in 10 lack a succession plan, according to a new survey.

NFP Advisor Services Group, a business segment of National Financial Partners Corp., New York, published this finding in a survey, “The Efficient Frontier of Succession: Maximizing Practice Value.” The survey is based on the results of a March 2012 poll of 227 practice owners and interviews with leading buyers of advisor practices, brokers of practice sales, and consultants in the financial advisor marketplace.

Of those advisors who are within two years of transitioning their practice to a successor, 42% lack a succession plan, the survey says. An additional 13% have a plan but do not have all the elements in place to execute.

As a result, the report adds, 54% of practice owners who lack a succession plan do not know the value of their practice.

One in three advisors who acquired a practice to build a book of business report the acquisition resulted in a client retention rate of less than 50%, the report says. Client retention is the top challenge of 22% of advisor who acquired a practice.

Almost 70% of advisors believe they will need five or fewer years from the time they decide on a succession strategy until they leave their practice, the report adds. As internal succession is the most desired method of succession, “five years or fewer would be tight for finding, hiring and grooming an advisor who is suitable for the practice,” the report says.

The report also finds that one in 10 financial advisors is over 60. Nearly 1 in 5 is will be transitioning to a successor within two years and 4 in 10 will be transitioning within 10 years.


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