The wealth management industry is consolidating due to demographics and the high costs of compliance.

Leon LaBrecque, chief strategist and founder of LJPR, which manages $626 million in assets, has grown the firm steadily in its 25-year existence, but says that would be difficult to do if he were starting up now. “The independent fiduciary market is consolidating,” said LaBrecque. “A lot of smaller RIAs are aging or being saddled with compliance costs. The critical mass for a firm is getting bigger. Now, $600 million is the threshold for a midsize firm. We have a full time compliance officer. The compliance and regulatory environment make it almost untenable for a small RIA to do it effectively.”

According to the latest research from global analytics firm Cerulli Associates, 32% of financial advisors in the U.S. plan to exit the business within the next 10 years.

“The need for succession support is growing,” said Kenton Shirk, associate director at Cerulli. “Finding a suitable succession partner can be a major hurdle that frustrates advisors early in the process.”

A number of challenges face the advisory industry, including education on use of alternatives, direct managed account platforms, the threat of assets moving to dually registered advisors and RIAs, advisor compensation, and succession planning, according to Cerulli.

“It can take a year or longer to fully execute a succession plan,” Shirk said. “The process can be especially difficult for those advisors with a unique specialization, diverse business lines, or a secluded location.”

LJPR, based in Troy, Mich., a suburb of Detroit, provides wealth management for what LaBrecque calls the “working affluent”—many of them retirees from the auto industry.

“We did a white paper on lump sum distributions for GM, and got 46,000 downloads, or almost everyone at GM,” said LaBrecque. “A highly effective way of getting yourself in front of people is to create an unbiased piece of information that recognizes you as an expert in a given field.”

“2014 financial plans need to address future medical costs. “We’re suggesting in plans that we build in an extra health care component for health care copays, medigap insurance, conventional and long term care,” said LaBrecque. “Social security maximization is an issue for retirees not in full collection, particularly couples. 2014 may be a good year to formalize financial plans. The next generation (i.e. children and grandchildren) should be introduced to wealth preservation concepts.”

Cerulli warned that clients and staff are often uncomfortable raising questions about succession and encourages advisors to communicate their future plans with key stakeholders long before they plan to retire. They may introduce clients to their future successor to build rapport and smooth the transference of the relationship.

“It is important not to overlook emotional hurdles, as these frequently sidetrack succession,” Shirk said. “Some advisors struggle to hand their client relationships to someone else.”

Whatever the obstacle, Cerulli recommends that advisors thoroughly envision their retirement before jumping into succession planning. This will help them identify how they can maximize the benefits for themselves, their clients, and their families.