As the world has grown more complex, so too have the opportunities, challenges and conditions that comprise the environment in which we live and interact with one another. A direct consequence of this ever-increasing complexity is the manner in which professional advisory firms—particularly law firms—have had to evolve into large, often international institutions with sufficient numbers of experts to meet the needs of individuals and organizations operating in and dealing with the challenges of the modern world. Ironically, the leaders and owners of these professional services firms, typically referred to as “partners,” are now themselves facing a great challenge—and many of them do not yet realize it.

The partners of the largest law firms are among the best-educated, powerful and influential members of our society. Their work is interesting; their careers are important; and their pay can be extraordinary, easily exceeding $1M per year at some of the largest firms. In turn, more junior attorneys are attracted to join these firms, supplying a continuous flow of top talent to advise future generations of clients. These junior attorneys support the partners’ work, fueled in part by good pay and the opportunity to become partners themselves—and that is the foundation of the problem.

In order to ensure that there are sufficient opportunities for the next generation of talent while simultaneously preserving the economic balance in their firms, law firm partners, especially at larger firms, frequently impose mandatory retirement requirements on themselves, typically around the age of 65. And, in recent years, the trend has been to incent or force partners to retire even earlier, sometimes as early as age 55.

A Perfect Storm

Yet, this trend of earlier retirement for law firm partners has become problematic in recent years, as the key underlying financial realities that have previously enabled early partner retirement are now under assault. Consequently, aging partners who have earned higher incomes and accumulated substantial wealth over the course of their careers may feel a false sense of security, while they actually are in grave financial danger. This danger can be summarized as a “perfect storm” of sorts, fueled by a precarious mixture of one trend, earlier retirement, with three others:

1. Life expectancies are increasing, making the retirement phase longer. As life expectancies continue to rise, responsible financial planning analyses must now assume that retiring partners may live well into their nineties. This means that the time between retirement and death may last for 30 or more years, but many partners simply do not realize the challenges inherent in ensuring that their savings can last for such a long period. These challenges relate not only to the obvious difficulty of making a pool of assets last for three or more decades but also to the fact that unexpected events—such as divorce, disability, family emergencies, health crises or others—are statistically more likely to occur during such a long period of time, placing additional stress on the partner’s assets.