(This is the second in a two-part article on retirement issues for advisors.)

There is a lot of talk about retirement these days. Within the financial advisory community, the talk centers around an aging population of practitioners who might have unrealistic expectations about the value of their practices. To successfully retire, advisors will have to carefully plan and develop a clear direction before taking action. But what are the directions?

In short, there are essentially four courses of action available to an advisor pondering retirement: 1.) Sell the practice outright, 2.) plan for succession, 3.) shut the practice down or 4.) work forever. Let's take a look at each of the options.

Sell The Practice
With the economic downturn, many advisors have confronted the need to market themselves (beyond simply asking for referrals from existing clients). To gain share, they have had to differentiate themselves using their unique marketing specialties, backgrounds, personal experience, etc. Yet the very things they use to make themselves stand out could hurt them in a business sale, since the clients may not find new owners with different specialties quite as appealing.

That means the advisor has to navigate the waters carefully, and his message to clients must transcend the owner of the firm himself. He will have to use those elements that attract new clients in a way that doesn't shut the practice off from potential buyers. When a firm is associated with a broker/dealer, the process of finding a suitable buyer may be fundamentally easier (assuming the B/D has provisions in place to help facilitate such a sale).

It helps if the original owner is willing to stick around for a while to personally introduce the key clients of the firm to the new owners. This goes a long way toward continuity and gives the clients comfort they are being left in good hands.

There are a number of firms assisting advisors in the sale of their practice. Perhaps best known among them is FP Transitions (www.fptransitions.com). The firm offers assistance to both buyers and sellers on succession planning and the sale/purchase of a financial practice.

There are also firms that purchase multiple financial practices, though these mergers and acquisitions (M&A) firms raise issues of operational compatibility and management style. The declining revenue at many financial firms in the last couple of years has led M&A firms to pull back from aggressive buying. But the future promises more activity since the negotiated sale prices of these firms are falling while assets under management are rising. In any case, to make sure these buyers are a good fit, you want to check references, call former clients, etc.

Plan For Succession
Succession planning to keep the firm going, but under different ownership, can pose the same continuity problems: An advisor who has differentiated herself from others by emphasizing her experience, expertise or some other singular trait must turn the practice over to another advisor who may not share her qualities. But it's easier for her to overcome this conflict with a succession plan, since she is likely handing the firm over to her staff or to a family member.

One practice, Sherwood Financial Group (www.sherwoodfinancialgroup.com) in Florida, went through this process a few years ago by grooming an employee/partner to eventually take over the firm. Unfortunately, the employee chose to go in another direction before the process was complete and the advisor had to start from scratch with another successor. The second time was a charm.

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