Report: Succession Plans Loom Large in Adviser Practices
Cerulli Associates, an international research and consulting firm, recently published The Cerulli Report—U.S. Advisor Metrics 2024, which examines the overall U.S. financial adviser marketplace and the current trends affecting it.
In the report, Cerulli said that total retail adviser-managed assets reached $31.3 trillion in 2023, while the total number of advisers in the industry has stagnated, with total headcount up only 0.2% over the last decade. The firm also stated that the average adviser is 49.2 years old, and it estimated that, over the next decade, 105,887 advisers plan to retire, comprising 37.4% of industry headcount and 41.4% of total assets. 26% of advisers who anticipate retiring within the next decade, however, are unsure of their retirement plans, with this rate being highest among advisers who are affiliated with independent RIA firms (30%).
Cerulli stated that the growth of independent affiliation is increasing the share of financial advisers who operate as independent business owners. These advisers will also oversee their own business succession and face a variety of challenges associated with developing a succession plan that is necessary for them to retire, including finding a qualified buyer for their practice (86%), structuring deal terms (63%) and valuing their practice accurately (53%), among other challenges.
At the same time, Cerulli reported that firms that are interested in growing inorganically through the acquisition of other adviser practices face their own challenges, including the investment of time necessary to finalize a deal (67%) and negotiation and style differences with the seller (53%).
Cerulli’s research showed that nearly half (48%) of advisers are interested in acquiring a practice. Additionally, 28% of financial advisers are open to an acquisition but not actively searching for one, while 19% are actively searching for acquisition opportunities.
“The significant challenges faced both by sellers and potential buyers have created robust demand for third-party firms that can provide expert valuation and advisory services as they relate to these types of transactions, and for firms such as independent broker-dealers for whom these services create an opportunity to expand their value proposition to their affiliated advisers,” said Andrew Blake, associate director, wealth management at Cerulli.
Additionally, the report stated that 18% of advisers plan for junior advisers to succeed them, but this approach also faces significant challenges as Cerulli estimates that 71% of rookie advisers fail within the first five years. The company recommended training programs, professional development and mentoring to help new advisers transition into production roles.
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business.
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