Advisors and the wider wealth industry talks a lot about succession planning when it comes to clients, but getting this right for the advisors themselves is important. They also need to ensure all services are in place to appeal to the rising generation of HNW individuals.

The following article, on succession planning, comes from Chad Druvenga, CEO of CBS Brokerage. Druvenga examines how aging advisors who offer clients ancillary services like estate, tax, and insurance planning help keep clients loyal, ensuring that they remain in place for Gen 2 advisors. The editors are pleased to share this content and analysis; the usual editorial disclaimers apply to outside contributors’ copy. To comment and get involved in the conversation, email tom.burroughes@wealthbriefing.com

It’s no secret that the financial advisory industry is on the doorstep of a succession planning challenge. While many advisors have taken the warning signs seriously, there are still many who haven’t considered a realistic approach to transitioning their business. Recent data from Cerulli found that more than 100,000 advisors will retire in the next decade, accounting for more than 37 per cent of advisors and 41 per cent of total assets nationwide. These numbers are significant and signal a great opportunity for both the advisors who are retiring and those who are acquiring their businesses. 

As retiring advisors consider how they will approach selling their business, they are smart to look under the hood of their practice, assessing both the depth of services they provide and the relationships they’ve fostered with their clients. Most advisors have built a business around financial planning services. 

These core offerings are like the strong foundation of a well-built house. They are vital to having a structured financial future. But, just as a house needs insulation, electrical wiring, plumbing, and other critical components to be fully functional and resilient, a firm requires ancillary services such as insurance risk management, tax planning, and estate planning to be robust and secure. These additional services can be differentiators for your clients now and into the future, while ensuring that your firm remains strong through succession. 

Why broaden your suite of services? 
In short, clients are demanding it. A recent Cerulli report found that high net worth clients are demanding more complex services. More than one-third of those surveyed said services offered or client experience was a deciding factor when they chose their primary advisor. This push for expanded services was also captured in an AssetMark survey, which shows that clients will leave their advisors if they aren’t providing the depth of services they are seeking. 

More than ever, firms are pressed to offer a wide array of solutions for every stage of their clients’ lives. As estate and tax planning take an important role in an advisor’s toolbox, the need for risk management and insurance solutions is just as important. Insurance is a key component of providing comprehensive services. 

Take, for example, a firm that works with the mass affluent segment. For this subset, events like a healthcare crisis or a poor long-term care plan can significantly impact the individual’s financial health. Without proper planning, the individual will be forced to draw down on their assets. This also causes an impact at the firm-level, negatively impacting the assets the firm oversees.

For advisors seeking to maximize the value of their business, an event like this can be catastrophic. However, proper planning – including proper insurance risk management solutions – can put the individual client in a better position to weather a storm, improve the relationship with the advisor and set the firm on a path to success. 

Leveraging the power of data to drive growth
Expanding your suite of services also expands the available data on your current client base. We are strong believers that appropriately leveraging data can drive real growth for a practice. When it comes to organic growth, ensuring that all relevant insurance data is meticulously collected and tracked within a CRM system addresses potential coverage gaps and keeps client information up-to-date. 

During the risk management review, I have seen the power of data entry coupled with a strong outsourced partnership. Specifically, one of our partner firms mandates insurance and annuity reviews as part of the standard client engagement process, and has seen a notable 4 per cent year-over-year organic growth rate. Much like the repeatable process a contractor follows to build a strong and safe home, this particular firm has successfully created a process that protects client assets and identifies new service opportunities. By continuously capturing and analyzing data, the firm can offer tailored solutions, deepen client relationships, and uncover new growth opportunities. 

This data harvesting creates opportunities with your clients and affords you better visibility into your firm’s revenues and residual income, a key factor when transitioning your business and maximizing your value. 

Services that work together 
Succession planning is not just about the future; it’s about building a resilient and adaptable business in today’s competitive marketplace. Undoubtedly, the industry is starting to catch on to the need for additional services – such as insurance risk management – whether internal departments or outsourced solutions, but the next challenge is making sure that all the levels of advice are integrated across firms to meet their clients’ needs cohesively. 

Historically, our industry has worked in silos, but together, we must figure out how all these centers of advice can operate under a fully-integrated approach. If we master this next step, RIAs can further protect their clients’ wealth and the longevity and growth of their practices. Embracing this holistic approach will not only strengthen client relationships but also ensure the legacy of firms for generations to come.