We all know the story by now. Independent financial advisors who have worked with their clients for decades derive great fulfillment from what they do, but they often lack a formal succession plan even as they approach retirement.
There are plenty of good reasons as to why many independent financial advisors postpone succession planning. First, it’s all about necessity. Most people who enjoy their work will keep doing it if their mental and physical capacity allow them to keep going. Why stop unless you must?
Next, relationships with clients matter. It’s not unusual for financial advisors and their clients to become personal friends over time, which injects an added level of emotional complexity to the picture. At a certain point, transitioning your book of business can feel like walking away from your own family.
Ultimately, much of the issue boils down to the emotional and practical challenges of viewing retirement as a “one-and-done” event. And the solution, to a fair extent, involves redefining retirement in order to drive more effective succession planning outcomes.
Redefine Retirement
Let’s start with a simple truth here: In the independent channel especially, there are no rules that an advisor must give up their daily work routine and go from hero to zero overnight.
Indeed, because of the tremendous level of emotional complexity involved, many independent financial advisors could be better served by starting with baby steps.
First, this means working less by cutting down on aspects of the job that they don’t enjoy, while staying on track with tasks that they love. Soon, they’ll find themselves working with their top 10 clients, or eventually coming into the office or logging in for two days a week.
In this period of transition, they can also begin outsourcing the menial paperwork or compliance duties to someone else, while spending more of their time with clients.
Once a certain comfort level has been reached with letting go to some extent, most independent advisors soon realize that small changes can make a giant difference.
Building reassurance among clients can only happen gradually over time and with the right plan. Much like slowing down and maintaining a safe cushion of space between cars is a must when descending an exit ramp, finishing strong requires preplanned measures that ensure a safe and trust-building journey.
Don’t Postpone Happiness
Advisors should be mindful of the financial setbacks that come with postponing succession planning. Worst-case scenario, an advisor who unexpectedly passes away without a plan will be leaving their spouse with a book of business that can quickly diminish in value if the family rushes to sell it on the market.
Similarly, advisors should be aware that retiring well means getting the maximum value out of their most important asset before it declines in worth. Succession planning is key for independent advisors if they expect their successor to continue their legacy—by replenishing the book’s value and onboarding younger clients.