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An advisor says technology can only take you so far and at the end of the day, providing financial advice is a very personal business.Blue Planet Studio/iStockPhoto / Getty Images

Some advisors in the U.S. now have access to sophisticated cloud-based tools that support succession planning by using algorithms to match those who are selling their books of business with others looking to buy, among other features.

However, in Canada, the consensus opinion appears to be that the industry doesn’t have the scale to implement programs like Raymond James Financial Inc.’s recently launched Practice Exchange. Still, technology is playing a bigger part in succession planning here as dealers use it in many ways to facilitate the process.

“We’re focused on leveraging great technology to [facilitate the] transition [of] client relationships from the seller to the buyer … because if you have a great client experience on a transition from a retiring advisor to a successor advisor, that creates confidence and trust, drives client satisfaction and retention, [and] leads to referability of the successor advisor,” says John Novachis, executive vice-president at Investment Planning Counsel (IPC) in Toronto.

“The technology of matching advisors to successors, I think it’s a great tool in the U.S. market. I’m not sure that’s as big a need in Canada. It’s a much smaller market, and dealers can actually play an important part to help match those relationships,” he adds.

At IPC, the emphasis has been on investing in technology in five key areas that support a smooth succession: digital onboarding to move clients to the new advisor; client relationship management to nurture those new client relationships; a goals-based planning tool to engage clients in the financial planning process; advice delivery platforms so clients can choose digital or face-to-face interactions; and a cloud-based tool that provides a secure place to conduct business inside or outside the office.

Educating advisors has been front and centre as well to ensure they understand there’s more to succession planning than choosing a successor.

Three elements Mr. Novachis says must be in place are a sound continuity plan in case something happens to the advisor, the development of a team of people to succeed the advisor, and a financial and tax planning strategy to exit the business.

“We’ve done probably $5-billion-plus of these transactions in the past two-and-a-half years [and] our retention rate, excluding market [returns], is well above 97 per cent,” Mr. Novachis says.

Nevertheless, he points out that, sometimes, advisors see succession planning, inexplicably, as failing the business or failing clients.

“It’s so wrong. If you’re a business owner, you should aspire to build a great business that somebody would be willing to pay you a premium price for someday,” he says. “That’s the mindset of an entrepreneur.”

Attracting younger advisors and clients

Eric Lauzon, vice-president of business development and recruiting at CI Assante Wealth Management in Montreal, believes many advisors, like other entrepreneurs, put off succession planning because the process is hard to go through and because it’s difficult for them to feel threats to their practices when business is good.

He argues that starting to integrate advisors who are 10 to 15 years younger into a practice is good for business right now – not just down the road.

“When clients see a grey-haired advisor in front of them, the vast majority of them won’t say anything, but they’re thinking, ‘How can this person accompany me in the next 10, 15, 20 years if they or their business are not equipped for that time period?” Mr. Lauzon says.

“The secondary benefit of succession [planning] is that you will acquire bench strength today. You’re going to have more depth to your practice and [more] knowledge, credentials. That can only serve to strengthen your client’s confidence in your practice.”

Technological tools can help by providing the analysis that enables advisors to know their business better so they can speak about it more clearly and authoritatively to potential successors, he says. It’s also vital for advisors to adopt certain technologies – cloud computing and storage, electronic signatures, electronic communication – to make their practices more attractive to the younger generation.

When clients see a grey-haired advisor in front of them, the vast majority of them won’t say anything, but they’re thinking, ‘How can this person accompany me in the next 10, 15, 20 years?’

Eric Lauzon, CI Assante Wealth Management

However, he notes that “Technology can only take you so far.” Providing financial advice is a very personal business with advisors often growing emotionally attached to their clients, and an algorithm-driven match may not translate into face-to-face chemistry.

What could help advisors with succession planning even more than technology is industry-wide encouragement of team-based practices, Mr. Lauzon says.

“There are a lot of grids out there that are [geared toward] ‘one advisor is the business,’” he says. “The financial structure of the partnership between the firm and the practice needs to be team-based-practice-friendly.”

Firms may also need to redefine their partnerships with independent advisors to make it financially possible for younger advisors to acquire retiring advisors’ practices, especially given the rapid growth many established practices have experienced recently.

“In the independent space, the new frontier is collaboration, much deeper collaboration, between the firm and the independent advisor within that firm to plan for their succession,” Mr. Lauzon says. “That can even mean that the firm will play an active part in that succession, potentially … where the firm itself would be involved in ownership.”