Study: Succession Planning Remains a Challenge for Financial Advisers Due to Real and Perceived Personal and Business Obstacles

DENVER, April 25, 2018 /PRNewswire/ -- A study released today by the Financial Planning Association® (FPA®) in partnership with Janus Henderson Investors reveals that 73 percent of financial advisers do not have a written succession plan in place, representing little change from a similar study conducted in 2015. Of those who are within five years of retirement, 60 percent do not have a succession plan.

Key findings from The Succession Challenge 2018: Why Financial Advisers are Failing to Plan for the Inevitable report include:

• Sixty percent of financial advisers who are within five years of retirement do not have a formal plan in place.
• Nearly half (48%) of those within five to 10 years of retirement do not have a formal plan in place.
• The disparity is even greater between firms based on assets under management with 60 percent of those with assets in excess of $500 million with a plan compared to just 13 percent of firms with less than $50 million in AUM.
• Ninety-five percent of financial advisers say there is some level of risk with not having a plan, while advisory teams are equally concerned about the absence of a plan (96%).
• Advisers who are planning for their succession are focused more on the "value" of their business (72%) rather than the "transition" of their business (57%), which is of significant importance to their teams.

"Succession planning is critical for financial advisers. Not just for the benefit of clients so they know they will be taken care of when their adviser retires, but for the benefit of those on the adviser's team who need to know how they will be impacted when the senior adviser or principal decides to retire," says 2018 FPA President Frank Paré, CFP®. "It's clear from the research that while we know we need to take the steps necessary to develop a plan, some of us struggle with how to approach it or have significant personal obstacles that might impact our ability to get the planning done."

What's at Stake?

The research shows that while a combined 95 percent of financial advisers say there is some level of risk with not having a plan, their team members are also concerned with the absence of a plan and the risk not having a plan carries with it (96%). While there are many causes for the absence of a plan, a key consideration is the lack of adviser clarity on their own plans for retirement. In fact, only 11 percent of all advisers are absolutely clear on their plans for retirement and another 29 percent have some level of clarity.

What's Holding Advisers Back?

With regard to retirement, advisers shared their main personal concerns that are potentially holding them back from thoroughly engaging in the succession planning process. Among the concerns are worrying the business will not be as successful if they are not there (67%), having a hard time thinking about moving on from the business (63%), and knowing that the business is ready for succession, but not being sure they are personally ready (61%).

The research explores the biggest challenges facing financial advisers and their inability to plan for business succession. While finding the right successor leads the way in terms of challenges, what is clear is that advisers are facing some personal challenges that are impacting their ability to plan. The four challenge areas include:

• Fifty-one percent say the biggest challenges were strategic (e.g., finding the right successor or partner).
• Twenty-two percent say the biggest challenges were personal (e.g., personal concerns about retirement, identity).
• Fifteen percent say the biggest challenges were structural (e.g., structuring the business to maximize value).
• Twelve percent say the biggest challenges were mechanical (e.g., the mechanics of creating a succession plan).

"Putting in place a succession plan is paramount to building a high-functioning, cohesive team as it gives advisory teams peace of mind that their future is in good hands," says Michael Futterman, Director of Janus Henderson Labs. "At Janus Henderson, we have developed a suite of tools utilizing our expertise in self-awareness, building extraordinary teams, igniting practice growth, among others, to help advisors take the necessary steps to building their succession plan."

Now the Good News

Despite an overall lack of formal succession planning, many advisers have set a goal for the value they want to achieve for the business at retirement and feel confident they are on track to meet that goal. There are no clear trends with respect to how advisers plan on transitioning, although internal successions are most common.

• When it comes to valuing and transitioning the business, 61 percent of advisers have a goal for the value of their business.
• Those advisers with a succession plan are considerably more likely to set a goal for the value of the firm, with 83 percent saying they had a clear goal.
• A majority of advisers feel they are on track to meet that goal (60%) or are ahead of the goal (15%) and confidence increases with the size of the business.

The Succession Challenge 2018: Why Financial Advisers are Failing to Plan for the Inevitable is now available and additional tools and resources to help financial advisers address succession planning are available from Janus Henderson Investors. Additional white papers are being developed to help financial advisers apply the research to their businesses and will be made available in June and July 2018.

Survey Methodology

309 financial advisers and team members from across the country responded to an online survey conducted in February 2018 by Julie Littlechild of AbsoluteEngagement.com with nearly half of respondents identifying themselves as independent RIAs. Respondents included senior financial advisers, junior/associate financial advisers, non-adviser management, support staff (e.g. technical and administrative staff) and others.

About the Financial Planning Association
The Financial Planning Association^® (FPA^®) is the principal professional organization for CERTIFIED FINANCIAL PLANNER^TM (CFP^®) professionals, educators, financial services professionals and students who seek advancement in a growing, dynamic profession. Through a collaborative effort to provide more than 23,000 members with tools and resources for professional education, business support, advocacy and community, FPA is the indispensable resource for today's CFP^® professional. Learn more about FPA at OneFPA.org and follow on Twitter at twitter.com/fpassociation.

About Janus Henderson Labs
At Janus Henderson Labs, a consulting division of Janus Henderson Investors, we are committed to providing best-in-class programs to truly make a difference in financial professionals practices and lives. Our programs can help fortify a financial professional's strengths and deepen their client relationships through the following four pillars:

• Professional Development: Tools across a variety of disciplines to help financial professionals build a successful practice
• Wealth Management: Strategies and advice for high-net-worth clients
• Defined Contribution: Services and solutions to enhance a financial professional's retirement capabilities
• Portfolio Diagnostics Services: State-of-the-art analytics to identify portfolio risk

For more information about Janus Henderson Labs visit: janushenderson.com/labs

About Janus Henderson
Janus Henderson is a leading global active asset manager dedicated to helping investors achieve long-term financial goals through a broad range of investment solutions, including equities, quantitative equities, fixed income, multi-asset and alternative asset class strategies.

As at 31 December 2017, Janus Henderson had approximately US$371 billion in assets under management, more than 2,000 employees and offices in 27 cities worldwide. Headquartered in London, the company is listed on the New York Stock Exchange (NYSE) and the Australian Securities Exchange (ASX).

SOURCE Janus Henderson Investors

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