Most banks realize the benefits of having financial advisors and the recurring fee income they bring into the institutions. But as advisors’ books of clients and their assets under management have grown, so too has the age of those advisors. This means banks are confronting a growing challenge: succession planning.

Other segments of the planning industry—independent planning firms and wirehouses—have addressed this issue, but for a variety of reasons, banks have been slow to do so.

“Banks traditionally have been very transactional,” says Scott Stathis, a principal at research and analysis firm Stathis Kucholtz Partners. “They have tended to view their workers as employees. But as their bank reps have come to have increasingly wealthy clients, their work has become much more relationship-based, and while the bank may technically own those books of business, the reality is if the advisor leaves, there’s really no way to stop those clients from following them out the door.”

Roughly 43% of advisors in the industry, including the banking industry, were over age 55, with only 5% under 30, according to a Cerulli report.  In other words, a large number of advisors, including in bank programs, are potentially looking at either slowing down or getting out of the business altogether.

And while independent advisors are often able to sell their books and walk away with a nice pile of cash in retirement, that’s not normally an option for advisors in the bank channel.

In recent times this has led to a convergence of interests, of sorts, in finding ways to ease older advisors out the door while handing over their books to other advisors in the bank’s program.

Banks and their investment programs vary widely, both in size and organizational structure. Consequently, so do the succession plans being developed. But the general approach has been to find a younger advisor to replace the retiring advisor, and then design a phased hand-off, with some kind of fee-sharing on a sliding scale that leaves everyone well compensated and happy.

Marc Vosen, investment program manager at Cleveland-based Key Bank, recently implemented a “simple tiered, five-year succession program” for the 230 financial advisors at his bank. And he says that type of plan will become more common. “A lot of my peers say their bank has no succession plan, but I think they will soon. Having some kind of succession plan is something that all banks will have to do,” he says.


While some banks and larger regional brokerages, like Edward Jones, have had succession plans in place for a while now, others have not quite fully embraced the notion. “If a teller retires, we don’t pay them a percentage of the bank’s income for five years, so why would we pay advisors?” That’s how most bankers tend to look at it, says Patrick Jinks, director of succession planning and acquisitions at Raymond James Financial Services.

But those old mind-sets won’t work in today’s industry, says Paul Provost, executive vice president and program manager of Mutual Bancorp in Concord, N.H. “If the premise of the banker is that all clients are the bank’s customers, not the advisor’s, then that’s a danger to the banks. I mean, the bank can have the standard non-compete clause with their advisors, but if there’s no succession plan and the advisors just leave and set up shop independently, then clients can follow them on their own. And two or three years later, the advisors can go after the other clients.”

Moreover, banks that have a high-handed attitude toward the advisor/client relationship could find their advisors getting heavily recruited.

“Banks may claim that they own their advisors’ books, but there are firms like Edward Jones and Ameriprise that will say, ‘Hey, we know some of the book will follow them,’ and so they’ll write a check and lure away the advisor—and the best clients will choose to follow an advisor they like,” says Dan Overbey, president of industry association BISA and Atlantic Capital Advisors in Fort Lauderdale, Fla. (LPL is the TPM for Atlantic Capital.)

Overbey predicts it’s just a matter of time before banks all have succession plans in place. “It’s not reinventing the wheel, after all,” he says. “This is what the rest of the financial advisory industry has been doing for years.” (The next two stories highlight some examples of banks crafting plans for retiring advisors.)


Rob McCabe, chairman of Pinnacle Bank in Nashville, says that most banks haven’t dealt with this issue simply because they haven’t directly faced it yet.

He speaks from experience. “We’ve never lost a broker in 16 years of having an investment program,” says McCabe, “but we just had a guy who said he wanted to retire. We’ve learned that we need to solve this on a basis where everyone is happy. So we had a meeting with Raymond James, our broker-dealer, and with all the stakeholders. ... But it won’t be a one-stop plan—it will be unique to the advisor.”

Another advisor who wants to retire, he said, has worked with the bank to locate a new hire to be her successor. McCabe says she has already negotiated a commission-sharing plan with the newbie who will take over her book. “That succession process will take three to five years,” he says, “and that’s fine with us. You need a long runway to keep clients happy. Anyhow, it’s not our money.”

Handled correctly, it can be a benefit for the bank as well as the advisor. Peter Vonk, executive vice president for business services and chief compliance officer at CFS, agrees that there is “a lot of aggressive recruiting going on.” But, he says that he’d like to see those succession (or retention) plans being used to encourage reps to stay several more years while they’re at the top of their game.

“The value proposition for banks and credit unions is you get to retain advisors until they retire. You can also get them to train their replacements. And it’s revenue neutral, so why would bank managers not do it?” 

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