How financial advisors fail to plan for their own future

  • A succession plan is a two-sided coin: ensuring business continuity for existing clients at owners' firms, and training the next generation of young financial planners.
  • Advisors sometimes fail their clients when it comes to planning in advance for a change in management at the advisory firm.
  • Some see diversifying the industry in terms of gender and ethnicity as key to future success.

Many financial planners are doing a poor job at, well, planning — both for the future of their own firms and in grooming the next generation of advisors. In a case of the proverbial cobbler's children being the worst shod, only 30 percent to 35 percent of financial advisors have a succession plan in place, David DeVoe, managing director and founder of San Francisco consulting firm and investment bank Devoe & Co., told attendees at Charles Schwab's IMPACT 2017 confab in Chicago.

These two interconnected dimensions to the problem of succession planning — how to ensure continuity at firms after owners retire, and recruiting younger talent — were tackled at several different forums and educational sessions at IMPACT, from "Reaching Millennial Clients with Millennial Employees" and "Finding Today's Top Talent to Build for Tomorrow's Success" to "Two Sides to One Coin: How Ownership and Management Relate at Advisory Firms," the latter presented by DeVoe.

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"Succession planning in this industry continues to be very low," he said. "This is a challenge, a potential exposure point, not just for [advisors] individually but for the industry overall."

Speaking one-on-one with CNBC.com at IMPACT, Erika Safran, certified financial planner and founder of Safran Wealth Advisors, noted that "by not having a succession plan, you're doing a disservice to your clients." Worse yet, she said, many advisors who do have a plan in place — whether it's developing talent in house or forming strategic alliances with to other advisory firms — don't advise clients of the details. "Your clients have to participate … so that they know that you care about them and they know that they'll be taken care of," Safran added.

For his part, Barry Glassman, CFP, founder and president of Glassman Wealth Services, pointed out that it's crucial the financial advisory community — dominated by older white men — evolve to better serve and ever more diverse U.S. market. Succession planning, he said, will no longer mean "just contingency planning or planning in case there are unfortunate circumstances."

"Starting with strategic context, thinking through your critical goals and objectives, is really the starting place." -David DeVoe, managing director of DeVoe & Co.

"It's really embracing not just the younger generation but showing the next generation that diversity's important — and bringing those partners in as partners, and as successors," Glassman said. "We can do nothing better than to show our clients that that embracing [of diversity] is imperative and will move the needle on reaching their goals."

Recruiting millennials, diversifying by gender and ethnicity, identifying in-house talent, sniffing out potential strategic alliances and even acquiring another firm to be your successor — it can all be daunting, noted DeVoe of DeVoe & Co.

"Pretty soon what started as a pretty simple equation – how do we achieve succession planning — is now overwhelming," he said, noting there are 30-plus succession planning factors to be potentially thought through. How to keep from getting overwhelmed? "We believe that starting with strategic context, thinking through your critical goals and objectives, is really the starting place," DeVoe added. "And that can help you handpick which [options] make sense."

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