New research from ValidPath reveals that while most independent financial advisers (IFAs) recognise the importance of succession planning, many are delaying it too long, potentially risking the ideal exit for themselves, their business, and their clients.
ValidPath surveyed a sample of IFAs and found that while three in four (77%) believe having a succession plan is important, only about a third (31%) consider it 'vital’ and nearly a quarter (23%) did not see succession planning as a priority for their business.
The research also found that only one in ten (9%) IFAs currently treat succession planning as a central part of their business strategy; with this figure increasing to just 25% among those looking to retire within five years.
Furthermore, more than a third (36%) of IFAs planning to retire in under 10 years admit they have given ‘little’ or ‘no’ thought to their succession plans. Most (57%) IFAs believe that less than five years is a sufficient timeframe to plan for their exit.
Key succession concerns include finding the right successor and ensuring continuity
ValidPath’s research explored IFAs’ key priorities and concerns when it comes to succession planning. The findings revealed that, when planning for their exit, the top three outcomes that 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 that they face – or fear they will face – significant challenges in achieving these goals; the key succession concerns cited by IFAs are finding the right successor, ensuring continuity for their clients, and accessing the necessary support to navigate the complexities of the exit process.
ValidPath's CEO, Angus MacNee, commented: “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.
“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.
“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.
“As an IFA, you may be highly experienced as an adviser and potentially as a company director and business owner, however, not have the experience of executing a growth and succession strategy or M&A process.
“That is why we’ve developed our Succession Solution – a comprehensive alternative to consolidation or a ‘do-it-yourself’ strategy – that allows the business to continue operating with the same people, culture, and ethos.
“By providing end-to-end support, covering everything from due diligence, growth planning and financial assessment to transition planning with Successor Managers, ValidPath helps IFAs to plan for their future and maximise the value of their business whilst empowering the next generation of financial advisers.”
