What You Need to Know
- The increasing number of representatives at or approaching the traditional retirement age of 65 has prompted FINRA to put succession planning in the spotlight.
- Retirement isn’t the only time such a plan may be needed; firms should be prepared for unexpected events like death or a disability.
- Firms and reps should also be aware of the legal and regulatory areas that come into play with succession planning.
Succession planning is not just for retirement, with firms implementing such plans for a variety of reasons, executives at the Financial Industry Regulatory Authority said on a recent FINRA podcast.
“It’s important to remember that the benefits of proactive succession planning are not limited to any particular age group,” said Jeanette Wingler, a special assistant to FINRA CEO Robert Cook, and a former associate general counsel in FINRA’s Office of the General Counsel, on the FINRA Unscripted podcast, Preparing for the Unexpected: The Ins and Outs of the Value of Succession Planning.
Succession planning, Wingler said, “can come into play for expected and unexpected events like death and disability,” and “a number of firms offer catastrophe or contingency plans to cover a wide range of events.”
The FINRA Unscripted webcast was a follow-up to a Regulatory Notice released in November emphasizing the importance of succession planning. The Notice pointed to the increasing number of representatives who are at or approaching the traditional retirement age of 65.
“One of the most interesting things about this topic is just the breadth and the variety of succession plans that we were able to learn about through our engagement with the industry,” added Elena Schlickenmaier, a member of FINRA’s Strategic Research and Analysis Group.
“There’s a lot of compliance areas where what you see is relatively consistent across firm grouping or firm business model or even firm size. But here there are as many flavors as there are firms,” Schlickenmaier said.
Examples of succession plans include “retirement plans, legacy plans, transition plans, accession plans,” she added, noting the range of names used and the variety of models, “many of which have formal elements and informal elements. Some are purely internal. Some have an external component where there’s support or infrastructure to facilitate a sale of a rep’s practice to another firm or another rep.”
Succession planning is also a topic “that is of great interest to small firms and sole proprietorships,” Schlickenmaier said, “where not having a succession plan may mean that the firm stops operation or requires the sale of that firm.”