FINRA Recommends Succession Planning for Brokerages

A chartered life underwriter drawing on his extensive knowledge of the life insurance industry and the underwriting process, Larry Anders serves as the chairman and CEO of Summit Alliance Financial, a leading brokerage agency in Dallas that offers various services including permanent life insurance, underwriting, and annuities, among others. Over the course of his career, Larry Anders has established himself as an industry expert in the brokerage industry.

In the final quarter of 2022, the Financial Industry Regulatory Authority (FINRA) published a 31-page circular that laid out guidelines for succession planning in the brokerage industry. Financial representatives are the target audience of the notice. Official successor designation, joint service to each customer (rather than a one-on-one relationship), reassigning customers to other representatives when necessary, hiring and training junior representatives, and the transfer of books of business are some of the major topics explained in the notice.

While succession planning is not an obligation for brokerage firms, FINRA urges financial representatives to prepare succession plans. The rationale for this recommendation is the extra layer of protection an efficient succession plan offers for clients. If a plan is in place, clients of a financial representative won’t be affected in the event of the retirement, illness, or death of the representative.

Over 600,000 brokerages are licensed by FINRA. According to FINRA, a significant proportion of these brokers are approaching retirement.