Many people spend so much time talking about their own retirement with their advisors that they never talk about the advisor’s retirement plans. To take it a step further, many advisors spend so much time planning their clients’ retirements that they don’t fully plan their own. It is a service business that doesn’t involve any manual labor (thankfully) so many advisors are able to work well into what would normally be their retirement years. There is also some added pressure to stick around for the people that have trusted them and leaned on them for decades.

At some point, the clock catches up and the advisor needs to start thinking about a succession plan. The goal should be to provide a high level of continuity for the clients. Team based practices are good candidates to offer that. If the advisor that has been the main point of contact for a client retires, the client gets some comfort in knowing that the team that has been behind the advisor over the years is still there. Furthermore, the client doesn’t have to worry about moving accounts or updating paperwork. While the client still ultimately needs to be comfortable with the team, it is certainly a good start.

The advisors who don’t have a team are in a different situation. If the advisor is at a bigger firm, he or she can either choose to partner with another advisor or team to develop a succession plan or the accounts can be reassigned throughout the office upon the advisor’s retirement. If the advisor is independent, there are similar options, but they won’t be as easy to find as walking down the hall to a neighboring advisor’s office. That could be a good thing or a bad thing. The good part of it is the options are not limited to advisors at the firm. The bad part is that unlimited options can be overwhelming.

Succession planning has become a hot topic as the advisor population ages. According to a 2019 J.D. Power study, the average age of financial advisors is about 55 and approximately 20% of the advisor population is 65 or older. The good news for clients is that they are in the driver’s seat. If your advisor is someone that you have worked with and trusted for many years, you should give some merit to his or her judgement in developing a succession plan. If your account is simply reassigned by the firm your advisor worked for, then that is a different story. Either way, you need to be comfortable. If it doesn’t feel right, you can always interview other advisors. At the end of the day, it is your money and your decision.

*JD Power Study

Disclosures