Many IFAs are delaying succession planning too long and, as a result, are putting at risk an ideal exit for themselves, their business and their clients, new research has revealed.
According to research from ValidPath, an independent IFA network, while three in four IFAs (77%) believe having a succession plan is important, only 31% see it as ‘vital’, while 23% don’t view it as a priority for their business.
The research also showed that only one in 10 (9%) IFAs current treat succession planning as a central part of their investment strategy, with this percentage jumping to just 25% among those planning to retire within five years. Most IFAs surveyed (57%) believe that less than five years is a sufficient timeframe to plan their exit.
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Angus McNee, CEO at ValidPath, said: “These findings highlight the gap between recognising the importance of planning for your exit and actually taking meaningful action.
“The good news is that most IFAs understand why succession planning is important, but only 9% currently treat it as a central part of their strategy. This obviously means that the overwhelming majority of IFAs (91%) are not being strategic with their approach to creating and realising value or indeed executing a plan to optimise their business potential.”
To maximise value, MacNee said it is important that the business is in ‘shape’ in terms of processes, profitability, management information, servicing, growth and other factors.
He added: “Just as advisers work with clients to build financial plans for the future, they must take the same structured approach to their own future and plan their value creation and exit strategy.
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“By planning early, IFAs can maximise their business value, ensure a seamless transition for clients and staff, and achieving the best financial outcome for themselves and their business.”
When it came to actual succession planning, the ValidPath findings showed the top three outcomes IFAs are primarily focused on are ensuring a smooth transition for their clients, securing the financial outcome they need from the process, and maintaining their firm’s independence.
However, the research also revealed they face – or fear they will face – significant challenges in achieving these goals. The key succession concerns cited by IFAs were finding the right successor, ensuring continuity for their clients, and accessing the necessary support to navigate the complexities of the exit process.
