More High-Performing RIAs Have Succession Plans

More than one in three registered investment adviser (RIA) firm owners—37%—plan to exit the business within the next ten years, up from 30% in 2014, according to research from the Fidelity RIA Benchmarking Study.

The study finds a majority of firms (59%) prefer an internal succession. However, only 27% of firms have next-generation owners in place and only 9% of equity, across all firms, is held by those next-generation owners.

Fidelity’s research also identified a group of “high-performing firms”— those firms which outperformed others in growth, productivity and profitability—and found them more prepared when it comes to succession planning.

• More than half of high-performing firms (52%) have succession plans ready for implementation compared with 40% of all other firms;
• A higher percentage of these firms have changed their approach or readiness for succession over the last three years (68% vs. 52%); and
• More of these firms have hired, identified or begun developing potential successors in the past three years (23% of high-performing firms vs. 15% of all other firms).

High-performing firms also appear to be connecting the dots between succession planning and valuation: 75% of them have a mechanism in place to determine firm value in the event of an internal succession or ownership transition versus 61% of all other firms.

“As firm leaders sit down to think about their business plan for 2016, they should also consider what their 5-year, 10-year, even 20-year, plan is for their business. What will their legacy be?” says David Canter, executive vice president, practice management and consulting, Fidelity Clearing & Custody Solutions. “They can look at the succession plans their peers are crafting for insights on what they need to do and steps they need to take now, not later.”  

The 2015 Fidelity RIA Benchmarking Study surveyed 441 registered investment adviser (RIA) firms between April 21 and June 15 in collaboration with an independent third-party research firm.