The financial advice world frequently changes size and shape, and for some practices this has made planning for the future more difficult.
While most remaining advisers have now committed to staying in the industry, hundreds have told us they’re unsure about whether they’ll continue, with uncertainty about future regulation among the reasons they’re on the fence.
Regardless of future intentions, succession planning is an important strategy for advice businesses, especially as firms start to grow. For some practices, it means identifying key talent to step into new roles in the future, while for others it involves who will take the reins if a manager leaves. It can also involve preparing for merger and acquisition activity.
Despite its importance, however, succession is an area of vulnerability Adviser Ratings research has identified over the years. Last year, 80 per cent of practices told us they don’t have a successor lined up, but half said they would need one. Talent supply issues were among the complicating factors advisers identified.
A year later, many practices across the licensee spectrum have revealed they don’t have up-to-date plans. Here’s what our surveys have shown in the past 12 months.
Where practices stand
Across 2022, we saw a marked improvement in the number of mature businesses with up-to-date succession plans. In 2021, less than half of businesses in this category had a plan that was ready to go, compared with more than two-thirds a year later. One-third of businesses in the five-year-plus category still need to write or refresh their plan.
However, most businesses that have been around for four years or less don’t have an up-to-date succession plan. For those in business two to four years, just under two-thirds have said they either need to do more work or don’t have a plan. Among young businesses, just under one-in-five don’t have a succession plan, with a similar proportion currently developing one.
Figure 1 – Succession planning for young and established businesses
Source: Adviser Ratings’ Australian Financial Advice Report 2023.
Most advisers plan to stay
As we mentioned earlier, most current advisers say they’re here to stay. Almost four-in-five told us they have no intention of leaving, while only one-in-ten say they will depart. Among the latter cohort, some are retiring.
The remainder of advisers we surveyed are unsure. Again, they’ve indicated getting a clearer picture of how rules will or will not change may help them make their decisions.
Figure 2 – Do you intend to leave the industry?
Source: Adviser Ratings’ Australian Financial Advice Report 2023.
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