Invest1 publisher3 min readPublished
Only 38% of retiring advisory owners have named the successor 86% of juniors say they want
An Edward Jones and Morning Consult poll puts fully documented succession plans at 42% of advisors. The practitioners explaining why chosen successors leave split between the price of the equity and never being told the equity exists.
The Investor · Invest desk
What happened
- Five succession-planning experts told American Banker that identified successors leaving before the handoff is a common problem across RIAs and other advisory practices.
- An Edward Jones and Morning Consult poll of hundreds of advisors this summer, published earlier this month, found 42% had completed a succession plan with full documentation and legal requirements.
- The industry expects more than 100,000 advisors to retire over the next decade while consumer demand for quality advice rises.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- contradiction Fenimore puts the price of the equity among the reasons successors walk. Genjac says most of the ones she sees leave because they never understood ownership was on offer. The retention spending an owner chooses depends on which account is right.
- constraint If internal handoffs take a decade or more, an owner who opens the question three years from retirement has already lost the internal option and is selling to an outside buyer.
- cost The financing structure decides whether the successor carries a lump sum or decades of debt. The founder's exit price is capped by what that person can actually fund.
- decision Equity compensation and career-path spending comes out of current owner income for a transaction ten years out, and it raises the valuation the successor will have to meet.
Subtract the poll's two headline shares and they sit 48 points apart. They count different people. 86% of junior advisors said they were interested in receiving an established practice from a retiring founder, while 38% of senior advisors anticipating a transition within five years had identified a successor [9][10][1]. The other 62% of that senior group has not [4].
Mitchell Fenimore, a former investment banker, is now the Lancaster market leader for River Wealth Advisors. He gave American Banker three reasons a chosen successor leaves. Only one of them can be fixed without money [3][4]. The equity carries a high potential price tag, and running the firm is an "added headache" [4]. The third reason is that the founder never told the junior advisor the equity might be theirs someday [4]. "Why do I want to take on this burden, this hassle, when I'm perfectly comfortable with my lifestyle and making the money that I'm making?" Fenimore said [5]. Many, he said, would "rather jump over to a new firm" [7].
Julie Genjac, an advisor coach and vice president of applied insights at Hartford Funds, puts the free item first. Most of the time, she said, successors leave "because they don't understand" that there is an opportunity to become an owner. In her example, "ambiguity is interpreted negatively" and the clearer path forward for their career is elsewhere [17][18].
The poll did not test price. Senior advisors named two barriers most often: the complexity of succession planning and the emotional hurdles of handing off their legacy businesses. The junior advisors asked for more training resources, plain guidance and support from the firm, and an established structure for any matching or transition program [11][12]. The case that the equity price tag is what breaks internal handoffs rests on Fenimore's account of what he sees; the survey evidence points at complexity, emotion and missing structure.
The recommended fixes only work if they start early. Internal handoffs usually take a decade or more, so the experts tell owners not to start a few years before retirement [14]. With more than 100,000 advisors expected to retire over the next ten years, about 10,000 a year, the founder retiring in 2036 is the one who has to write the equity plan now [1][2]. The financing then has to be built so that an early-career advisor is not on the hook for a huge lump sum or a debt that takes decades to pay back [16].
There is a cost buried in the equity advice. Equity compensation plans and career paths aid long-term retention and make the business more valuable [15]. The successor is the person who eventually has to buy that more valuable business, at the price tag Fenimore says they already balk at [4].
American Banker notes, paraphrasing a common axiom in the field, that firms which have solved their own succession problems have cracked the code at one firm in an industry with tens of thousands of them [20]. Given that, I would put the first dollar into the explicit conversation, because it is the only item on the list with no price and it establishes early whether the junior advisor wants the job [13]. The counter-case is Fenimore's own: name the opportunity without a funded structure and the founder has told the successor precisely what they cannot afford, so the departure moves from the ambiguity stage to the valuation stage [4][16]. What would show that wrong is a firm that discloses the ownership path a decade out, funds it, and loses the successor on price anyway.
What to watch
- Whether Edward Jones and Morning Consult repeat the poll, and whether the 38% successor-identification share moves in the next round.
- Any RIA that publishes what its internal equity plan actually charges a junior advisor, since the published advice stops at avoiding a lump sum.
- Whether the 42% share of advisors with a fully documented succession plan rises as the 10,000-a-year retirement run rate continues.