Only one in three advisory firms has exit plan: Study

Advisory firms continue to face daunting transition issues as advisers age and contemplate retirement, according to speakers today at the 2010 InvestmentNews/Moss Adams Financial Performance Study of Advisory Firms Workshop in San Francisco.
Only one in three firms are adequately prepared for retirement, according to the study. Yet the average age of advisers is 54, said Mark Tibergien, chief executive officer of Pershing Advisor Solutions LLC, one of the speakers at the workshop.
Identifying the right successor is the key factor in making a successful transition, according the study, but 70% of firms are operated by solo practitioners who “don’t want to work for anyone else,” he said.
Solo practices with just one key person are worth less than practices that have multiple owners and managers, Mr. Tibergien said, adding that the solo practice’s options are more limited than those of firms with multiple owners.
“They either get less or they get lucky” in finding a buyout option, he said. Although there’s an active market of buyers in the market, it could be risky if owners are counting on that money for retirement.
Advisory firm owners need to look for talent continually, said Kelli Cruz, director of custom research at InvestmentNews, and they need to start early in developing the next generation of owners and directing them through well-defined career paths.