Over the years, JLG has covered the importance of a solid succession plan, emphasizing the need for ongoing review and revision, and the steps necessary to ensure a business can continue to operate in the absence of its key figures. The purpose of a good succession plan is to provide a deployable framework for addressing both expected transitions and unexpected situations that prevent key leaders from functioning within the company. This includes planning for:
- Emergencies, such as sudden illness or incapacity
- Planned temporary absences, such as vacations or sabbaticals
- Planned permanent exits, such as retirement
Detailed information on building that foundational plan can be found in our previous piece, Leadership Succession Planning is a Must for Risk Mitigation.
However, external factors can affect even the most comprehensive succession plans.
This month’s Corporate Communication addresses one of those external factors – successors – and the key question:
What if there is no one to take over?
According to Cerulli Associates’ most recent advisor research, roughly 35% of financial advisers, representing about 40% of industry assets plan to retire within the next decade. However, more than a quarter of those advisers remain uncertain about their succession plans.[1]
The exodus of the next generation of investment advisers (IAs) continues to be a notable point of concern with restrictive regulatory qualifications, inadequate planning, and financial uncertainty as some of the reasons for the small pool of younger IAs. This exodus is especially detrimental to the business continuity of smaller RIAs.
The challenge is not simply replacing retiring advisers. Firms must also retain and develop emerging talent capable of stepping into leadership and client-facing roles when transitions occur.
Why the Next-Gen IA Exodus?
Driven candidates continue to be drawn to the financial services industry, however, regulatory hurdles including strenuous licensing exams and unpredictable earnings if pay is commission-based not only discourage new advisers from joining the industry but also leads to attrition.
Cerulli Associates estimates that roughly 72% of new advisers fail or leave the profession within their first five years. [2]
New hires are frequently used to support the existing client base rather than developed as future advisers. Candidates who don’t see a clear path usually opt out of the industry, and those who stay long enough to become viable successors are often recruited away by firms with a clear growth path.
Critical Steps to Planning for a Succession During a Next-Gen Exodus
IAs should take the following steps to encourage their younger counterparts to grow within the industry and to position them as viable successors:
- Plan early and deliberately: Succession planning for a next-gen shortage can’t wait until retirement is imminent. Begin identifying and developing more than one potential internal candidate five to ten years prior to planned retirement.
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Close the equity gap: Setting up a mentee for success is the clearest path to retaining younger talent.
- Set clear leadership expectations including responsibilities and timeline;
- Set clear equity expectations, formalizing a growth track with clear milestones and expected compensation.
- Formalize mentorship and structured development: Learn-as-you-go onboarding is a major contributor to the high rookie failure rates. Pairing new advisers with senior mentors and increasing client-facing responsibility on a deliberate schedule can help discourage attrition.
- Modernize compensation and career pathing: A pure commission model for new IAs without a developed book of business can discourage new talent. Implementing a base-salary-plus-incentive structure for early-career hires and developing a clear path to advancement can help retain next generation leaders.
- Diversify the recruiting pipeline: Recruiting exclusively from other firms is limited strategy. Expanding recruitment avenues such as offering structured internship or externship programs and providing opportunities for career changers can attract a larger pool of viable candidates.
- Prepare clients for the transition: Introduce future successors to key client relationships when possible. This can help with strengthening continuity and maintaining client trust.
Succession planning in today’s world should be approached proactively as an ongoing business strategy that addresses the shrinking pool of next-generation advisers while identifying key steps to ensure business continuity.
For assistance with developing, reviewing and updating your succession plan, please contact us at 619.298.2880 or email [email protected].
[1] Cerulli Associates, “Advisor Retirements Underscore Need for Stronger Rookie Development,” 4 Aug. 2026, https://www.cerulli.com/press-releases/advisor-retirements-underscore-need-for-stronger-rookie-development..
[2] Cerulli Associates, “The Financial Advisor Industry Has a Headcount Problem,” 16 Jan. 2024, https://www.cerulli.com/press-releases/the-financial-advisor-industry-has-a-headcount-problem
