Advisers who fail to create a robust succession plan for their businesses are "preparing to fail", financial specialists have claimed.
With advisers considering how to make their businesses last not just for their own lifetimes but also for succeeding generations, having a clear-cut plan to pass the baton is a business necessity.
But as Keith Richards, chief executive of the Personal Finance Society, and Paul Morrish, group corporate director at Succession, told the latest FTAdviser podcast, it is also becoming a regulatory imperative for business owners to define and clarify how their clients will be handed on to the next generation of financial advisers, whether that is selling the firm or keeping it independent.
Mr Morrish said: "Failing to plan is planning to fail". He said this maxim was applicable to any firm, whether the business owner wants to pass it onto the next generation of advisers, or to sell it to a larger trade buyer or consolidator.
According to Mr Morrish: "Without a plan, you can get hoodwinked into doing something you may wish you had not done, or you will fail to get the value that is rightfully yours, built up over a lifetime of work. What surprises me is that some people still take a risk in how they will exit their business when they do not have a plan."
When it comes to drivers behind wanting to leave the industry, whether retiring or just selling up, there have been many regulatory changes that may have contributed to business owners seeking a clear route to exit.
Mr Richards said there were "a number of triggers: depolarisation brought in changes in the way advisers are remunerated; we have had the Retail Distribution Review and now pension freedoms."
As a result of these, and ever-rising professional indemnity insurance premiums and regulatory costs and levies, he said advisers were now more than ever thinking of how to pass the firm on to the next generation.
And this, he said, means making sure there is ongoing and recurring revenue coming into the firm in order for it to remain profitable and both attractive to prospective buyers and stable for existing clients.
"Many advisers I speak to want their firm to be a legacy, to last long after they have retired", Mr Richards said. "Firms do need to plan, and sooner rather than later, and this is what we are seeking across the market."