Research from ValidPath has shown that while most independent financial advisers (IFAs) understand the importance of succession planning, many delay it too long, risking their ideal exit.
The survey revealed that while 77% of IFAs believe having a succession plan is important, only 31% think it is vital, and 23% do not prioritise it.
Only 9% of IFAs treat succession planning as central to their business strategy, a figure that only rises to 25% among those planning to retire within five years.
More than a third (36%) of IFAs planning to retire within ten years have given little or no thought to their succession plans.
Most (57%) of IFAs believe that less than five years is sufficient to plan their exit.
Angus MacNee, CEO of ValidPath, said: “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.”
MacNee also noted the importance of having a well-prepared business in terms of processes and growth.
MacNee added: “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.”
The research highlighted key succession concerns such as finding the right successor and ensuring continuity.
He said: “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.”
He added: “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.”
