Are You Preparing for the Succession Planning Crisis in the Advisory Industry?

The retirement plan advisory sector is at a crucial juncture, facing a growing challenge that demands immediate attention: succession planning. The U.S. is projected to face a significant shortage of wealth management advisers, expected to hit around 110,000 by 2034, as highlighted in a recent McKinsey & Co. report.

The irony, as pointed out in the report, is that those who guide plan sponsors through rigorous long-term planning often neglect to do the same for their own businesses. The results can be disastrous for firms lacking a clear succession strategy. Leigh White, a Certified Exit Planning Advisor and co-founder of Myriad Advisor Solutions, notes, “The business owner has built this book over 20 years...But they’ve tied the entire value of the firm to their personal relationships with clients. They say they’ll never retire—and then a crisis forces the issue.”

The Emotional Challenges

Advisers face emotional blind spots that affect their decision-making. Sara Celotto, a fractional chief operating officer and founder of Vision Catalyst, says, “Advisers don't just sell a service—they sell a relationship. That makes the transition deeply personal, and that also makes it fragile.” The fear of losing client connections or being perceived as dispensable can lead to avoidance of succession planning altogether, plunging firms into uncertainty.

White's personal experience illustrates this challenge. Upon founding multiple companies, she made hasty decisions due to burnout, leading to regret after her first sale. It wasn’t until she faced a serious health crisis that she began considering a robust succession strategy for her current firm.

Planning Without Committing

For those hesitant to move fully into a succession strategy, there are flexible options available. Michael Mufson, an investment banker who specializes in liquidity events, emphasizes that not every succession needs to result in a complete exit. “There are ways to de-risk and stay involved,” he says. By pursuing majority recapitalization, firm owners can secure a liquidity event while retaining a minority stake—allowing them to maintain a foothold in the business they built.

Understanding Unique Challenges

Advisers serving institutional retirement plans face additional vulnerabilities due to the nature of their client relationships. Seasonal reviews can jeopardize contracts, making client retention critical during transitions. “If the relationship is only with you, and not with your team or brand, you might lose that account after a transition,” White warns. To safeguard client relationships, she advises involving junior team members in sponsor interactions and automating processes.

A Call to Action

For those yet to embark on a succession path, White suggests starting with a simple “stay-or-go” process. “Conduct a business valuation. Then decide: Do you want to sell now, or improve first and sell later?” This reflective exercise can illuminate the firm's value and opportunities for improvement.

The stakes are high, and the cost of procrastination can be severe. Without a formal plan, unexpected events can disrupt relationships, leading to internal chaos and client attrition. “Succession planning doesn’t have to mean you’re stepping away tomorrow. It just means you’re protecting what you’ve built—for your clients, your staff, and your legacy,” White concludes.

For a deeper dive into the ongoing crisis in succession planning within advisory firms, read the full article here.