Financial advisors dedicate their careers to helping clients plan for retirement, but when it comes to mapping out their own post-career arrangements, many have more work to do. That’s according to a recent Ameriprise Financial pulse survey of 150 advisors from across the industry. The survey revealed that 44% of advisors are only somewhat (28%) or not confident at all (16%) in their retirement plans. Their uncertainty may stem from a lack of planning. A third of advisors surveyed (33%) admitted they do not have a succession plan for their practice in place—and even those who do (77%) are not necessarily updating it in real time. More than 42% say they need to add details or refresh it altogether.
This poses a conundrum. Why would advisors—who specialize in helping people retire—put off making plans to secure their own futures?
It may be due to a lack of time and resources. Running a successful practice in this industry is a major commitment and advisors tend to put their clients’ goals and priorities ahead of their own. It may also be intimidating to know where to get started. Advisors spend their careers building their books of business, managing teams and weathering market cycles. The prospect of one day winding down the operations they have put decades into creating—and doing so at the optimal time and under the right conditions—can be overwhelming.
Fortunately, advisors don’t have to take on their retirement and succession plans alone.
How do they get started? Here’s a high-level overview:
Assess the situation. Advisors need to take stock of where they are with their lives and careers. Have they saved enough money to lead a long, successful retirement? Are they ready to slow down professionally, so they can spend more time traveling, with family or volunteering? The answers to these questions help advisors determine if they’re ready to take a step back from their careers.
Determine timing. Once advisors have a good handle on their current situation, the next step is to determine when they’re going to exit the business. They should build flexibility into the timeline if they can. Even the best plans can be tested in the face of an unforeseen health crisis or financial event, for example. The ability to speed up or delay their retirement date can help advisors manage these unknowns, should they arise.
Identify a qualified successor. As advisors consider their successors, they should ask the following questions: Do they have compatible work styles and ambitions? Are they based in a location that’s convenient for clients (if not, can they serve clients remotely)? Do they have the tools, technology capabilities, products and resources to effectively serve clients? Are their values and client service models aligned? Being compatible with a successor increases the likelihood of a smooth transition. Proper financing options are critical, too. Before getting too far into the negotiations, advisors should consider whether their prospective successors are backed by a financially-sound firm that can help them close the deal. If not, they may want to look elsewhere.
Communicate the transition. After advisors align on the terms of their succession plans, they should develop a solid plan to communicate the transition to their clients and team members. When you think about the importance of smoothly transferring clients to a new advisor—it’s a complex journey and it’s essential to get it right.
Manish Dave is senior vice president of business development and experienced advisor recruiting at Ameriprise Financial.