Why RIA Successors Walk Away and How Firms Retain Them

A summer survey of advisors found 42% have completed documented succession plans. The poll also reported 86% of junior advisors want to take over an established practice, while only 38% of senior advisors expecting to transition within five years have named a successor.

Experts who advise registered investment advisory firms identified unclear communication about future ownership, the burden of running a firm, high equity prices and the risk of large acquisition debt as common reasons successors depart. Mitchell Fenimore, market leader at River Wealth Advisors, noted many potential successors prefer to join another firm rather than wait years for an ownership stake.

Consultants and coaches pointed to three related failures: founders do not discuss succession openly, firms lack structured career and training pathways, and financing plans ask junior advisors to cover large lump-sum payments. Julie Genjac, vice president of applied insights at Hartford Funds, observed successors often exit because they do not realize ownership is possible.

Informal promises can create resentment. Scott Leak of FP Transitions warned that vague talks can make junior staff feel the “carrot is being dangled” without a timeline or legal paperwork, prompting them to look for clearer opportunities elsewhere.

Advisers recommend starting succession conversations well before retirement and creating staged equity or profit-sharing arrangements tied to job milestones. Steven Tenney of Grandview & Company recommended using a longer timetable as a financing tool so successors can earn equity gradually while daily operations remain stable under shareholder or operating agreements.

Financing alternatives cited by advisers include transferring a minority stake before seeking outside investment, seller-financed deals and negotiated swaps as part of an acquisition. Advisers noted that appointing multiple successors can reduce the sense that one advisor must shoulder all debt or “fund this person’s retirement.”

Training and management practices are also linked to retention. Hannah Moore of Amplified Planning noted many firms have career path outlines but lack training programs that prepare managers to develop teams and retain younger advisors.

Industry specialists reported that fewer than half of advisors surveyed had completed legally documented plans. They emphasized that buy-sell agreements and valuation work have limited value if there is no written plan and the designated successor leaves.

Advisers recommend founders discuss succession openly, document agreements and design equity and training plans that reduce upfront financial burdens for successors. The survey results and adviser comments identify these topics as priorities as firms prepare for a projected wave of retirements.