Less than a third of financial planning business owners plan to exit their business within the next five years, and only 10 per cent have a documented succession plan in place, new research has found.
An MLC/NAB survey conducted in September by Business Health questioned 230 businesses from MLC and other licensees on behalf of NAB Business Bank’s Financial Planner Banking team and the MLC Adviser Business Centre.
Bob Neill, national manager, MLC Adviser Business Centre, says the findings that only 30 per cent of practice owners plan to retire within the next five years contradict much of the market commentary over the last few years around succession planning.
“The survey indicates that financial planning business owners are continuing to push back their exit plans, rather than trying to get out early,” he says.
“We have been encouraging businesses for some time to take a longer term approach to their exit. We were surprised to learn though that only 10 per cent of businesses surveyed have a fully documented succession plan in place.
“Businesses either don’t consider it important to have a succession plan or more likely, they are unsure how to develop one and put it into action.”
Almost 80 per cent of respondents have not changed their exit timeframes in the last 12 months, despite the recent market volatility.
“It’s likely that many potential successors will be forced out of equity participation due to their inability to raise the required finance,” says Malcolm Arnold, national manager of NAB Financial Planner Banking.
“Banks are increasingly being approached by young advisers seeking large amounts of finance over very short time frames,” Arnold says.
“To increase their chances of successfully raising finance we are urging younger advisers with aspirations of owing equity within a practice and becoming principals, to ensure the current owners are aware of their ambitions.”
