Succession planning tips from advisors

The country’s financial advisor demographic is aging. For those advisors who are still without succession plans, it’s time for them to consider the risks of procrastinating.

Investment Executive‘s (IE) 2021 Advisors’ Report Card, which was based on surveys of more than 1,600 advisors, found that the average age across the brokerage, dealer, retail-bank and insurance segments was 50.1, compared with 49.4 two years prior.

Yet a recent study conducted by Environics Research Group for Investment Planning Counsel Inc. (IPC) found that while 69% of Canadian financial advisors said they’re nearing retirement, only 11% had a formalized plan.

Marie Phillips and Stephanie Power understand the importance of succession planning and business continuity. Phillips, 52, is a wealth advisor with IPC in Ancaster, Ont., while Power, 37, is a financial advisor with IPC in Corner Brook, N.L.

Both were the successors of their current books of business — and both have begun strategizing for when they’ll have to retire.

Phillips bought her book in 2012 from a retiring advisor with Hamilton, Ont.-based Burgeonvest Bick Securities Ltd., where Phillips worked from Jan. 2010 to Dec. 2012. The book she acquired had $7 million in assets under management (AUM) across 80 clients, and it has since grown to about $115 million in AUM across 165 clients.

She said her method for business growth involves “listening to clients and getting them to tell their story. It’s having a methodical approach that’s repeatable,” which in her case has led to strong referral growth.

Phillips doesn’t plan on retiring soon, but had to re-evaluate her approach in July 2020 due to a health scare. After she fell near Lake Nipissing — which resulted in an ankle fracture and other serious medical issues, including a bilateral pulmonary embolism — she realized the importance of planning ahead.

“The first thing I thought of were my kids [and] my husband; wondering if I was going to be alive,” Phillips said. She is now doing better and was able to re-condition her lungs by playing the clarinet.

While Phillips enjoys being an advisor, she’d like to reduce her client load to 50 families within the next 10 years. To help, Phillips added an advisor to her team in 2020 who could take over some clients.

“Having other advisors around who can absorb the overflow [and] having licensed staff has been a lifesaver for me, because they were able to help run my practice while I was ill,” she said.

Furthermore, “having new advisors coming in, and helping them grow their business, [also] is a good succession plan for me,” she added.

Phillips said sharing a similar investment philosophy to your successor is important. For her, someone who took a holistic planning approach was key, as was agreeing on a communication plan for clients. Ironing out these details makes for smoother client transitions, she said.

In Power’s case, she learned the ins and outs of succession planning while her buying her mother Ann’s $100-million book in January. Ann is 65 and plans to retire within a couple of years.

“I saw how much she enjoyed working with her clients and fostering the relationships. I thought, ‘This really could provide a great life and career for me and my family,’” said Power, whose book includes more than 300 households.

Power originally joined her mother’s business, Corner Brook, N.L.-based Harbour Financial Group, in 2010, after leaving Grant Thornton where she was a tax consultant. That was the first step of her mother’s retirement plan.

Power took her time buying the book because she wanted to get established in the industry, she said, and prioritized working under and learning from her colleagues. 

She decided to take the full plunge earlier this year to help provide a smooth transition for her mother’s clients. “I saw how much her clients meant to her; it’s an emotional thing to sell your business,” Power said. “I wanted to make sure she knew that they were going to be taken care of and [her book] wasn’t just going to be pieced out to whoever could buy it.”

Despite her close relationship with her mother, Power said taking the emotion out of the succession process wasn’t challenging. “You can’t take that out of it altogether, especially when you’re related parties, but you have to show that you’re [making the transaction and negotiating] at a fair market value.”

Power suggests advisors embarking on a succession plan should first speak to their accountant and someone who can assist with book valuation.

“The key lessons that I learned were, definitely, to get the right team around you,” Power said. “[Succession] is going to take time, so you have to start early with your planning.”