Financial adviser exit strategies in a tied agency environment in relation to trust, socio-emotional wealth and commitment to stakeholders

Abstract

The lack of succession planning by financial advisers poses a threat to the business continuity and sustainable growth of life assurance and investment companies. This study aims to address this problem by developing a profile of financial adviser exit strategies and succession arrangements in a tied agency environment in relation to trust, socio-emotional wealth and commitment to stakeholders, thereby enabling life assurance and investment companies to more effectively manage the succession of their tied financial advisers. A quantitative study was performed analysing 111 responses from an online survey sent to all tied financial advisers aged 55 and over of a large South African life assurer. The results of the study identify that higher levels of trust, socio-emotional wealth and commitment to clients are related to a stewardship exit strategy which includes succession, with higher levels of trust being related to the existence of succession arrangements. Profiles of exit strategies and succession arrangements were established, enabling the prediction of exit strategies based on trust in non-family and family members and the prediction of succession arrangements based on socioemotional wealth and trust in non-family members. The study contributes to family business and entrepreneurship theory by identifying a dichotomy of tied financial adviser practices into those that demonstrate family business characteristics and those that do not and by developing a model of financial adviser exit strategies and succession arrangements. The study concludes with recommendations to management of life assurance and investment companies for managing the succession and exit strategies of tied financial advisers.