It’s time for thousands of aging advisors to make some hard choices: to sell their firms, cut back or incorporate younger leadership into their practices.

These are the issues facing some of the most successful people in the advisory business over the next few years.

Should these veteran advisors—most of whom are in their 50s or 60s or older, who have been in the business for decades—rebuild a practice, one whose average clients are also likely aging and who often want to know what will happen to them if the advisor retires? Or should the advisors sell or bring in younger leadership?

Should they recognize that their most productive years are behind them, and accept a lesser role in their firms? Should they find a way to tap into the equity of their firms now, while they still can, making a commitment to a young partner to retire in a set number of years?

The Survivors

“The average advisor has spent a lot of years in this business, and being able to survive he or she has generally done very well,” says Bill Butterfield, a senior analyst with Aite Group. He notes most advisors are in their 50s. The average advisor is about 51, he says, and needs to consider retirement and succession issues.

“The best age for financial advisors to retire is at age 59 because they have peaked in terms of their business growth rate,” says David Grau, the founder of FP Transitions—a firm that helps financial professionals analyze the worth of a business and formalize transitions.

Some note the potential problems created by this aging of the industry.

“Many of them haven’t saved enough or have been divorced and need the income. But they put off the decision to sell for too long,” says Douglas Kreft, FP Transitions’ vice president of sales and services.

“Sometimes they bring in someone with the promise of eventually taking over the firm, but that never seems to happen because many advisors love the advisory lifestyle,” Kreft says.

Meanwhile, he adds, many clients worry about aging advisors who they will likely outlive and wonder if the advisor is still as effective as he or she once was.

“Trade Him Now!”

Branch Rickey, the legendary co-owner of the Brooklyn Dodgers, famously said, in ensuring that a team realized the ultimate value of a player, that it was better to trade a player a year early rather than a year late. A veteran observer of the advisory industry posits a similar rule.

Apparently, there’s lots of work to do. That’s because about 40 percent of advisors thinking about retirement do not have a succession plan, according to a 2012 study by Aite Group. But FP Transitions says the percentage is much higher than that, and that many advisors have a problem planning their personal future. They have spent so much time figuring out client retirement plans that many haven’t considered their own or how they will ever cash in the equity in their businesses.

In the meantime, they are missing potential problems around them. They have not given consideration to the long-term trends that could be endangering their businesses and their equity, industry observers say.

The danger signs are numerous.

Where Have All The Clients Gone?

Consider the advisor with a lot of elderly clients, a fair number of whom are now dying. Some of them have substantial assets, but their heirs don’t want to continue with the same advisory services. They are members of a new generation with little connection to their parents’ financial counselors.

The advisors might start to get very few new clients and almost no young ones. The most important assets of their practices, assembled through years of carefully built relationships, start to disappear. The advisor may see little or no equity at the end of his or her career as a business owner.

For Kreft, the problem is that the average advisor is a sole practitioner with almost no organization, and possibly just a staff of one or two people. He or she doesn’t want to face the problem, keeps saying something will be done, but puts off serious consideration, possibly until it’s too late.

Who Will Be The Next Leader?

“They don’t have a second-generation plan in place or even a contingency person,” Kreft says. “Aging clients in their 80s or 90s start to ask what happens to them if the advisor dies.” The advisor often doesn’t want to retire because he wants or needs the yearly income; he either never sells the equity in the firm or tries to do it when it’s too late to pull equity out. He fails the Branch Rickey test for obtaining maximum value.

“At a certain point, you are either going to grow a business or it is going to die,” says CFP Emily M. Chiang. Or you do what she did: She sold her advisory business some three years ago. Chiang, with 35 years’ experience in the financial services industry, is the author of the book Selling Your Financial Advisory Practice: A Step-By-Step Workbook.

Although selling is the logical move, some advisors, like aging sports stars who can’t acknowledge they’re no longer great, may not realize that the prime years are past, says an industry observer who analyzes the business.

Should an advisor build a new house as the old one begins to crumble? Start building up a new client list even as the old one starts to disappear? That usually means bringing in young professionals who can communicate with clients difficult for the veterans to reach.

Yet Kreft says it’s difficult for veterans to bring in new professionals and make it work out. Either the wrong person is hired—someone who isn’t trained properly—or the younger advisor becomes impatient waiting to take over, perhaps becoming resentful while doing the lion’s share of the work. A middle option for veterans, Kreft notes, is to sell the firm to the younger person and become that person’s employee or an independent contractor over time.

“This provides continuity. The expertise the owner has built remains with the firm after he has sold,” Kreft says.

Time To Sell?

Advisors might want to sell, says Chiang, if they don’t care as much anymore about the business they spent decades nurturing. Chiang says she decided to sell hers when she realized she was becoming bored by client stories.

“I said to a client during a very difficult meeting that I was tired of discussing her financial planning issues,” Chiang says. “Although I immediately apologized for what I said, I knew instinctively that the end of my practice had arrived and it was time to exit.”

She notes that aging advisors find unique problems in rejuvenating the practice by finding younger clients, and they face a generation gap.

“It’s hard for an advisor in their mid-50s or older to talk with someone in their mid-30s,” she says. “It’s like talking to their daughter or son. It can be tough to advise them. Many adults are still mentoring or coaching their adult children even into their 30s.”

“It is a very personal decision that each advisor has to seriously consider as they age,” Butterfield says.

The Retirement Warning Signs

Chiang, who spent some two decades as an advisor, lays out in her book the most common reasons to leave:

*You’re exhausted from running the practice or maybe just bored.

*You have too many senior moments and you’re no longer at the top of your game.

*Business has peaked or stopped growing. You have very few new clients.

For her, the question of whether to rebuild or retire is simple.

“When you are no longer passionate about solving problems for clients, it’s time to retire,” she says.