Dentistry, advising, and retiring without a succession plan

When an advisor quits abruptly, clients will do what they feel is in their best interests, and not their advisor’s.

Last week we received a letter from our dentist informing us that he was retiring due to a sudden health setback. My wife and I had been under his care for decades, and I had recently asked him when he thought he might hang up his drill. But his response was always that he still enjoyed work, followed by assurances that his retirement was years away.

While the letter I received introduced a younger dentist who will be taking over the practice, I’ve never met this person and know nothing about him.

My wife and I briefly discussed what we should do going forward. We felt a bit of an obligation to our dentist to try out his replacement, in large part because we know many of his staff, and because we figured he would have some financial incentive to transfer as many of his patients as possible. However, we also know a few other dentists in town, both from social circles as well as from friends’ recommendations.

In the end, we decided that we would try a new dentist closer to our home who had been suggested by by a neighbor.

With the well-publicized aging adviser demographic, I would expect that every week thousands of individuals and families receive a letter from their financial advisor like the one I referenced above. Their trusted adviser, whom they have been relying upon for years, has a health issue and can no longer continue.

The advisers who have been proactive and have taken succession planning seriously not only have a replacement in the wings, but that replacement adviser has already met and even worked with the clients. And make no mistake, this aspect of succession planning makes a firm more valuable to buyers and partners when it comes time to sell or retire.

The sobering reality is that all your clients have other financial advisers in their lives. They know them from the club, church, pickleball, or their neighborhood: people they like and respect and whom they could easily trust with their financial lives.

When an advisor quits abruptly, even though it’s through no fault of their own, clients will do what they feel is in their best interests, and not their advisor’s.

As an advisor, you certainly know that nearly 50 percent of people are forced to retire earlier than anticipated. While that number represents an umbrella that covers every profession, including wealth management, it’s also a number that I would wager many of you reading this have incorporated into your guidance to motivate pre-retiree clients to closely stick to a plan.

If you’re a financial advisor without a viable succession plan, which includes client relationships with your replacement, ask yourself what would happen to the value of your firm if you were suddenly forced to retire. Your clients may love and respect you, but they will invariably choose what’s best or easiest for them once you stop working.

Scott Hanson is co-founder of Allworth Financial, formerly Hanson McClain Advisors, a fee-based RIA with more than $19 billion in AUM.