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New Fidelity® Research Shows That Two-Thirds of Advisors Don't Have Succession Plans in Place

  • Wealth Planning
  • Wealth Planning
  • Wealth Planning
  • Wealth Planning

To Help Spur Business Continuity Planning as a Path to Comprehensive Succession Planning, Fidelity Now Provides Access to MarketCounsel’s “Succession Ready” Program

BOSTON -- Fidelity Institutional Wealth Services, a division of Fidelity Investments®, today unveiled new research from the 2013 Fidelity RIA Benchmarking Study that found two-thirds of participating firms (67 percent) reported they don’t have a succession plan ready for implementation.i While this reflects an improvement from the 2011 Fidelity RIA Benchmarking Study where 75 percent of participating advisors reported not having a succession plan,ii it’s still inadequate for an industry with an average age of 52.iii The 2013 study also found that more than half of participating firms (55 percent) have not changed their approach or readiness for succession for the past three years.

To help advisors accelerate their path toward succession planning, Fidelity is providing its clients access to a business continuity program called “Succession Ready.” Offered by the consulting firm MarketCounsel, the program provides Fidelity’s RIA clients access to a turn-key program at a reduced rate.iv The “Succession Ready” program aims to put some certainty around the unexpected, such as an advisor’s death or disability.

“While there is no substitute for comprehensive succession planning, we recognize that for many RIA firm leaders, this longer-term planning is a process that requires time,” said David Canter, executive vice president and head of practice management and consulting at Fidelity Institutional Wealth Services. “Yet there’s a need for advisors to put back-up measures in place immediately. Our goal with providing access to this program is to encourage advisors to establish business continuity plans – even before their succession plans – so they know their clients and their business are taken care of in case of an emergency.”

MarketCounsel’s “Succession Ready” program is designed to provide advisors three important documents that are commonly used to create a contingency plan:

Limited Power of Attorney -- outlines a temporary plan if something happens to the principal and they’re unavailable to run the firm, ensuring that the firm can continue to operate and serve clients;

Buy-Sell Agreement –- specifies who will acquire an advisor’s business or clients if the principal of the firm is permanently disabled or passes away, and contains provisions addressing valuation, payment of the purchase price and closing terms;

Operating/Shareholders Agreement Review –- provides a detailed review of these agreements to ensure they include provisions that address both the temporary and permanent unavailability of one or more partners or principals.

“We have found that prudent business continuity planning creates a logical bridge to begin the dialogue on succession planning,” said Brian Hamburger, president of MarketCounsel. “Looking at the issue from a practical scenario, the unavailability or sudden loss of key personnel makes the issue real. It’s a genuine business concern that advisors feel called to take on to protect their clients, employees and families. Advisors can begin to envision that without having to take on more difficult scenarios such as their own death.”

Effective succession planning is becoming even more critical to ensuring current business owners hand over control to others in a way that is least disruptive to their firm’s operations, clients and long-term value. Fidelity’s practice management and consulting team is dedicated to helping advisors prepare for succession through a wide range of resources, including:

• A new guide, “Developing a Plan to Transition Your Business to an Internal Successor,” that is designed to help firms develop an internal transition plan. The guide outlines six steps to help lead to a successful internal transition: 1) value your firm, 2) establish goals and determine timelines, 3) assess potential buyers, 4) evaluate different deal structure options, 5) address governance issues and 6) document your firm’s plan.

A focus on internal transition is critical as the 2013 Fidelity RIA Benchmarking Study found it is advisors’ preferred succession method. Specifically, the study found that more than half of participating advisors (57 percent) want to transition their firm to someone internally (vs. 11 percent wanting to merge with another firm and remain involved and 14 percent wanting to sell their firm and exit the business). These findings are in line with the informal surveys Fidelity has conducted at succession planning workshops across the country, which also found that the majority of those who want an internal transition have not yet identified a successor.

• Fidelity’s “Realizing the Value in Your Firm” program features in-person workshops and events hosted nationwide throughout the year that help advisors understand their succession planning options, engage with advisors who have executed succession planning strategies and ultimately choose the succession “track” that is right for them. Fidelity uses a guide as well as a sequence of personal and group exercises including the Track Selector GameTM to help advisors determine which of three succession strategies is most aligned with their vision: “internal transition,” “merge and stay involved” or “sell and move on.” The program is so distinct in the marketplace, it was recently awarded patent #8,533,017 by the U.S. Patent and Trademark Office.

• A robust M&A program that centers around education and insight, access to financing – specifically, through a recent alliance with Live Oak Bank – and connections to firms looking to buy, sell or merge.

About Fidelity Practice Management and Consulting Program
The Fidelity Practice Management and Consulting Program is a multi-faceted client service that provides advisors access to a wide array of insights, best practices, strategic consulting services and business-oriented tools and programs to help accelerate business growth, maximize productivity and protect their practices.v

About Fidelity Institutional Wealth Services
Fidelity Institutional Wealth Services is a leading provider of trading, custody and brokerage services to Registered Investment Advisors, Trust Institutions and Third Party Administrators. The company is able to leverage the capital, resources and expertise of the Fidelity organization, one of the world’s largest financial services companies, on behalf of its clients. This includes access to a comprehensive set of products and services, innovative investment tools and research, an integrated brokerage and trust platform, and dedicated client service professionals – all designed to help its clients thrive by growing their businesses, more effectively meeting customer needs, and enhancing operational efficiency and profitability. Fidelity Institutional Wealth Services custodies $660 billion in assets on behalf of more than 3,200 clients, as of June 30, 2013. For more information about Fidelity’s services, please visit http://fiws.fidelity.com.

About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $4.4 trillion, including managed assets of $1.9 trillion, as of September 30, 2013. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.

About MarketCounsel
MarketCounsel is the leading business and regulatory consultancy to some of the country’s pre-eminent independent investment advisors throughout their lifecycle. From its roots in 2000, MarketCounsel has been steadfast in its mission to deliver solutions to the challenges faced by entrepreneurs in a fast growing industry and has emerged as one of its most effective advocates.
From the initial launch of an investment advisor to its outsourced compliance platform to its business growth and succession strategies, MarketCounsel consistently delivers extraordinary service and trusted counsel by leveraging advanced technology and sound business processes. The MarketCounsel Summit is the annual gathering for the country’s top independent investment advisors and serves as the conversation among industry leaders.
 i Source: The 2013 Fidelity RIA Benchmarking Study. The 2013 Fidelity RIA Benchmarking Study was fielded from 5/1/2013 - 6/28/2013. 325 firms participated in the study.
ii Source: The 2011 Fidelity RIA Benchmarking Study. The 2011 Fidelity RIA Benchmarking Study was fielded from 8/1/2011 - 9/26/2011. 375 firms participated in the study.
iii Sources: Cerulli Associates, in partnership with Investment Management Consultants Association, the Financial Planning Association, WealthManagement.com, Morningstar, and Bill Good Marketing.
iv MarketCounsel is a third-party provider and is neither affiliated with nor an agent of Fidelity.
v When appropriate, Fidelity works closely with third-party providers to offer its practice management solutions. The third-party vendors participating in the Fidelity Practice Management & Consulting Program are not the only firms that provide products and services of this kind. Fidelity does not provide recommendations or endorsements with respect to any Fidelity Practice Management & Consulting Program vendor or any such vendor’s products and services. Each client should conduct its own independent diligence before engaging a vendor and determine whether the particular vendor is right for them. Clients deciding to employ the services of, or purchase products offered by, a vendor in the Fidelity Practice Management & Consulting Program will be required to work directly with the vendor. Fidelity is not a party to any business or contractual relationship between Fidelity Practice Management & Consulting Program vendors and Fidelity clients.

Service marks appearing herein are the property of FMR LLC.

Clearing, custody or other brokerage services may be provided by National Financial Services LLC, or Fidelity Brokerage Services LLC. Members NYSE, SIPC. 200 Seaport Blvd, Boston, MA 02210.

Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917