You must ask your IFA about their succession plan

May 6, 2020 2:49 pm


One of the most fundamental instruments of good financial advice an adviser can have is an in-depth knowledge of their clients.

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Often this is achieved through a long-standing advisory relationship, spanning years or decades. The trust and sense of stability that this builds comes with its risks, too, particularly if your adviser is likely to retire before you do.

The Financial Conduct Authority (FCA) requires that sole-adviser firms must have in place an acceptable level of succession planning if unforeseen circumstances mean that they cannot continue business for a period, or even indefinitely. This would involve an agreement with another firm standing in during their absence.

The insecurity associated with losing your trusted financial adviser is one thing, but the uncertainty of change when you become a client of an acquiring firm, such as increased fees or a different approach, may be unacceptable. No client wants to feel that they have been ‘sold’ to another firm. Being transferred to a similar and equally capable advisory firm would be something every client would hope to expect.

Don’t be afraid to ask

Succession planning is something every IFA should have put in place. There’s no harm in asking them what those plans are – in fact, it is one of the areas the FCA suggests you ask your adviser about. Does the plan involve transferring clients to a business that has similar credentials? For example, if your IFA is fully independent, will the successor be fully independent too, or offer a restricted service?

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Ageing IFAs

It’s well known that the financial advice sector is populated by ageing professionals, and although younger advisers are coming through, the average age is still over 50. With the recent legislation over pension freedoms, more advice is being sought by clients at a time when their advisers are already retiring.

Knowing who will take over, should your own adviser become incapacitated or retire is just as important as knowing how your finances will be managed in 5, 10 or 20 years time. It’s a perfectly logical and reasonable question to ask.