More than 37% of financial advisors think they’ll retire in the next decade, but more than a quarter of those are unsure about their retirement plans, according to new research by Cerulli and Associates.

And among advisors affiliated with independent RIA firms, that level of uncertainty is even higher — 30%, according to The Cerulli Report — U.S. Advisor Metrics 2024. The average advisor age is 49.2. Over the next 10 years, 105,887 advisors plan to retire, according to the report, which notes that’s 37.4% of industry personnel and 41.4% of total assets.

The growth of independent affiliation has made advisor retirements more complicated, but it has also increased the acquisition of independent practices within the channel, the report states.

Succession Challenges

Independent business owners face a variety of challenges related to overseeing their own business succession, including:

• Finding a qualified buyer for their practice (86%)
• Structuring deal terms (63%)
• Valuing their practice accurately (53%)

Among advisors who plan to retire in less than 10 years:

• 26% are unsure what their succession plan will be.
• 26% have identified an advisor in their practice as their successor.
• 14% plan for an external sale, which is most common among independent RIA practices.
• 18% plan for junior advisors to succeed them.

Regarding the last point, Cerulli reported significant challenges associated with this approach. The company estimated that 71% of rookie advisors will fail within their first five years.

To address this, “training programs, professional development and mentoring must enable new advisors to learn and transition into production roles instead of being confined to support positions,” the report authors write.

Growing Through Acquisition

Firms interested in growing through acquiring advisor practices also face challenges, including finding the time to finalize a deal (67%) and negotiation and style differences with the seller (53%).

Almost half of advisors (48%) are interested in acquiring a practice, Cerulli reports. Among them, 28% are open to an acquisition but not seeking one, while 19% are actively searching for acquisition opportunities.

“The significant challenges faced both by sellers and potential buyers have created robust demand for third-party firms that can provide expert valuation and advisory services as they relate to these types of transactions, and for firms such as independent broker-dealers for whom these services create an opportunity to expand their value proposition to their affiliated advisors,” Associate Director Andrew Blake said in a news release.

According to the study, advisor practices looking to acquire other practices need to invest sufficient time and resources to make an objective evaluation of two things:

• The quality of the experience that they can give clients
• The extent to which their business operates in a client-centric manner, both in philosophy and in practice.

“By doing so, not only will advisors maximize the likelihood of acquiring other advisor practices,” Blake  says, “but they will also maximize the retention of clients of the acquired practice, therein boosting the likelihood of inorganic growth through client referrals.”

Other Findings

Other findings of the study include:

• Total assets managed by retail advisors reached $31.3 trillion in 2023.
• The total number of advisors in the industry increased only 0.2% over the last decade.
• Practices with more than $500 million AUM accounted for 67% of all practices
• Half of practices with over $500 million AUM are interested in an acquisition.
• 45% of advisors mostly work with investors with $500,000 to $2 million in assets.
• 52% of clients are between 50 and 69 years old.
• 80% of clients report they’re satisfied with their primary advisor.