Although about 60% of financial advisers are baby boomers heading toward retirement, only about one quarter of them have a succession plan in place, according to Cerulli Associates Inc.
In an industry filled with compassionate, dedicated professionals who work hard to ensure that their clients have up-to-date wills, trusts and beneficiary designations, why would so many advisers avoid preparing for their own future? Why don't they address the issues associated with their own next-stage-of-life issues? A few possible reasons:
It requires tough decisions. It's hard to prepare a practice, clients and oneself for the next stage. There are myriad technical details involved in planning the logistics of a transition, in addition to issues that an adviser may not take into account initially.
Let's say, for example, that you manage the assets for 100 households in a small community in the Midwest. Of these, 93 are great, maybe even ideal, clients, but seven are pains in the neck. Whenever these clients need something, they wreak havoc in your office. On top of that, they're never satisfied. Obviously, you need to find them a new home. But in your small community, these clients are connected to neighbors, family and employees — many of whom would be ideal clients. To make your practice attractive to them, you first must do something about the troublesome seven.
“Herd mentality” leads to procrastination. If a 70-year-old adviser looks around and sees that three-quarters of her colleagues haven't done anything to address retirement, she may think, “What's the rush?”
And procrastination is the norm. Advisers, just like clients, avoid considering issues regarding the next stage of life.
It's difficult to give up a satisfying profession. Advisers enjoy a particularly high level of job satisfaction. In fact, when they work closely with clients to help them achieve their hopes and dreams, they may be operating at the self-actualization level, which is the top of the pyramid in psychologist Abraham Maslow's hierarchy of needs. At the same time, their compensation often allows them to enjoy the finer things in life and to live their dreams throughout their career. Why leave such a situation or spend much time focusing on what comes after?
The belief is that retirement means no longer working. Although many advisers support their clients' continuation of working in retirement, they don't apply that thinking to their own lives. They may fear leaving a profession and career that they love, so they stick their heads in the sand and continue working, though without the safety net of a succession plan in place for when they want or need to slow down.
Yet the fact is, boomer advisers may have the opportunity of a lifetime: They can prepare by transitioning the leadership role/structure of an organization to prevent un¬necessary disruptions in the business itself and have a buy/sell agreement in place that can be triggered by specific events. This allows them to continue working with clients as long as they can and want to, knowing that their clients will be cared for should something unforeseen happen to them.
What can the enlightened adviser — one who wants to buck the norm — do? Start early to do the following:
• Build your practice to be ready for a transition from the get-go. Put things in writing, e-myth the firm (that is, create your company's story) and run it as a bona fide business.
• Prepare yourself decades in advance. Life and career are not synonymous, but many advisers live that way. Regardless of age, start early to build a personal psyche in which you do not derive your entire value from working with clients.
• Prepare clients gradually. When clients ask about your succession plan, have an answer ready other than, “I'm working on it.”
• Set a date for having a plan in place. Make a list of details to address. For example, create a list of possible successors. Remember that finding the right person may require networking, lunches, interviews and possibly retaining a headhunter. Tell someone about your plan and the date you have set for achieving that goal.
• Most important, forget about finding a successor who is your clone. You are the only you. Finding a perfect replica is impossible. Finding someone who is compatible with your clients is a more realistic goal.
Joni Youngwirth is the managing principal of practice management at Commonwealth Financial Network. She can be reached at
[email protected].
