The successor is a buyer, and the terms are missing

Mitchell Fenimore's diagnosis of the successor who walks out the door starts with a sentence owners need to say early: that the equity could be yours. Fenimore, the Lancaster, Pennsylvania, market leader for Camp Hill, Pennsylvania-based River Wealth Advisors, says would-be successors often leave after balking at the added headache of leading the practice, at the price tag attached to the equity, or because the founder simply never mentioned that ownership was available. Many of them, he says, would rather jump to a new firm than stay, even when the eventual payoff from becoming an owner could be substantial.

Fenimore has stood on both sides of that table. A former investment banker who now advises business owners in a range of fields on their succession plans, he puts the successor's calculation this way: "Why do I want to take on this burden, this hassle, when I'm perfectly comfortable with my lifestyle and making the money that I'm making?" That is a purchase decision made without a number attached: the candidate is weighing a comfortable present against an unpriced future, and the person who could put a price on it has said nothing.

Five succession-planning experts in Financial Planning's reporting call the walkaway common, and it lands on top of a demographic clock in which more than 100,000 advisors are expected to retire in the next decade against rising consumer demand for quality advice. The polling underneath those exits is blunter: Edward Jones and Morning Consult surveyed hundreds of advisors this summer and reported earlier this month that 42% had completed a succession plan with full documentation and legal requirements, leaving 58% without one; among junior advisors, 86% said they were interested in receiving an established practice from a retiring founder, and among senior advisors anticipating a transition within five years, 38% had identified a successor.

Read the three findings side by side and the appetite is not in doubt, because 86% of the junior advisors said they wanted the practice. The shortage sits on the other side of the handshake: most owners polled have no fully documented plan, and, on Fenimore's account, many have not told the person in the next office that shares are available at all. Interest without terms is not a succession plan.

The barriers the polled advisors named were the complexity of succession planning and the emotional difficulty of handing off a legacy business. For their part, the junior advisors said training resources, plain guidance and support from the firm, and an established structure for any matching or transition program would help them inherit those businesses. That second list is a deal's outline, more concrete than the first, and industry leaders who have spent years talking about weak succession planning across wealth management now have research in front of them suggesting the gap has not closed.

Fenimore's prescription is wider than a memo: the possible solutions, he says, require thoughtful communication, career paths, equity compensation strategies, and an understanding of the many sources of capital and types of transactions that can fund a handoff. His pitch to a wavering successor is not sentimental; "This is where the real money is, if you become an owner," he says, and his warning points the other way, at the founder: "The sooner you can get ahead of this in succession planning, the better off you can be."

This publication has argued that the succession wave is a file-quality story, and that buyers pay a premium only once the founder's own pay add-back is priced. The internal candidate is where that argument bites hardest. He is the buyer with the most information and the least patience for an unmarked file: he has watched what the owner takes out of the business, how concentrated the client list is, and how much of the revenue depends on the founder's own relationships, so he has a number in mind before anyone hands him one. An owner who declines to put that number in writing is letting his most skeptical bidder set the valuation alone, and then reading the result as a resignation rather than a bid.

The external market, meanwhile, is happy to name a price. Edward Jones, which co-fielded the succession poll, sells advice through a branch network of its own, and the firm's $5,000 digital pilot is a bet on the handoff. A founder can run a version of the same test in an afternoon by asking the person already servicing the book whether they would buy it; that is the cheapest test of an aging book, and it costs a meeting.

There is a version of this on the client side of the desk: Fidelity's polling of investors 55 and older found that a completed plan buys less peace of mind than the industry assumes, and the same asymmetry appears to hold for a founder selling a practice, where the document carries less weight than the conversation.

The number to watch is the 38%. If next summer's version of that poll shows documented plans climbing while named successors hold flat, owners will have gotten better at the paperwork without getting better at the offer, and the sentence Fenimore wants said early will still be the one they skip.