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Business at Purpose Advisor Solutions Inc. is going gangbusters as more financial advisors enter retirement without succession plans.
The Toronto-based company, which is owned by Purpose Financial, serves as a matchmaker between advisors looking to sell their books of business and those looking to buy. Less than one in 10 Canadian advisors have a formal succession plan in place – 11 per cent to be exact – according to a March 2021 Investment Planning Counsel Inc. (IPC) survey conducted by Environics Research Group Ltd. Purpose Advisor Solutions offers a way to retire on relatively short notice.
“We have seen our pipeline of interested [advisor practices] grow by more than $20-billion in the past 12 months,” says Jeff Gans, the company’s chief executive officer and managing partner. That’s from a base of between $10-billion and $15-billion.
“Not all of those [advisors] will [make the] transition, but they’re engaged actively in considering options outside the traditional channels [such as] banks and insurance companies for their practices.”
In October 2020, roughly six months into the COVID-19 pandemic, Mr. Gans told Globe Advisor the matchmaking aspect of his business had already seen a “tripling, at least” and was “only going to accelerate from here.”
Part of that growth is due to demographics. The average age of advisors in North America as of 2019 was 55 years old, according to J.D. Power data, with roughly one-fifth of all advisors being 65 or older.
Meanwhile, about three in four advisors in Canada either only have a rough idea of a succession plan (39 per cent) or no plan at all (36 per cent), according to the IPC survey.
“That’s quite low,” says Sam Febbraro, IPC’s executive vice president of advisor services, “especially considering that our data indicate that 69 per cent of advisors are at the point in their career at which succession planning should be a top priority.”
That point should be when an advisor is at least 10 years away from retiring, he says.
Yet, the way succession works right now is that once advisors sell their books, they’re gone. There’s a very short transition period before they leave, Mr. Gans says.
“[It] forces advisors to make that sudden transaction,” he says. “I don’t think that is in the best interests of the client ... [or] the advisor.”
Mr. Gans says a smoother and potentially longer transition period is often ideal for both advisors and their clients.
“Nobody wants to go directly from working to not working anymore,” he says. “People see it more as a continuum now.”
Purpose Advisor Solutions is investing heavily in the resources required to meet that surging demand, Mr. Gans says.
“We think advisor succession planning is going to become even more complex,” he adds.
– Jameson Berkow, Globe Advisor Reporter
Must-reads from Globe Advisor this week
Are the two pension plans for business owners truly different?
The personal pension plan (PPP) has been marketed for the past decade as a superior alternative to the more common individual pension plan (IPP), but some industry insiders warn the sole provider of the PPP is actually enticing clients with claims of additional key features, which they say are of little value, to justify the product’s much higher fees. Jameson Berkow reports on why critics say “aggressive marketing” by the PPP provider is a problem.
Will pooling money make couples happier?
First comes love, then comes marriage – then comes time to merge finances, too? New research shows couples who pool all of their money are more satisfied with their relationships and less likely to break up than those who keep all or some of their money separate. Kira Vermond looks at the pros and cons of merging finances and how the idea of this has changed over the generations.
How to tackle paying a big tax bill to the CRA
While almost 14.4 million Canadians celebrated receiving a tax refund this year, about 6.2 million had a balance owing with an average amount of $6,612, according to the Canada Revenue Agency. Experts say education is key to avoiding tax bill surprises, but so are accurate projections and working with financial professionals. Alison MacAlpine talks to experts about strategies that can help minimize the impact of this on financial plans.
How to avoid costly tax issues when moving abroad
Whether they’re on the hunt for warmer weather, a more advantageous tax jurisdiction, or looking to cash in on higher property values in Canada in favour of a better cost of living elsewhere, more Canadians are exploring the possibility of enjoying their retirement years in another country. But this move is not one that should be made impulsively, say experts. Helen Burnett-Nichols looks at why clients should start planning years in advance.
What you and your clients need to know
Merger of industry regulators heads to final stage
The Canadian Securities Administrators released the names of proposed board members for the new self-regulatory organization that will combine the functions of the Investment Industry Regulatory Organization of Canada, which supervises securities dealers, and the Mutual Fund Dealers Association of Canada, which oversees 90 mutual fund dealers. Clare O’Hara reports on how this move is leading into the final stages of approval and what lies ahead.
Oil and gas stocks that could offer value and safety
Energy prices are soaring and some market pundits suggest there is still more upside to come. But it’s important for investors to note that this sector can be cyclical and volatile. Sean Pugliese and Allan Mayer of Wickham Investment Counsel look at 17 stocks using their investment philosophy and screening criteria that measures safety, stability and value.
The rising tide of surfing seniors
Surfing is a difficult sport that requires strength and endurance, among other things. Schools teaching the sport across the country are seeing beginner surfers well into their silver years. Experts say seniors shouldn’t let fear hold them back. Dene Moore reports on retirees signing up for lessons and what teachers say is needed to prepare.
- Globe Advisor Staff