|My two-stage plan for advisors who refuse to
Tuesday December 16, 2014
I am very discouraged by what I see happening with older financial
advisors in Canada who refuse to downsize their business and
prepare their clients for life without them. This is sad, because
if they pass away suddenly, typically their clients will be
in disarray and likely be dispersed among other advisors at
the same firm – a “solution” that has not been given much thought
or planning. I’d like to propose a two-stage alternative plan
that can assist both clients and their advisors who really should
retire but refuse to do so.
Why are these advisors not planning to exit the business themselves
when they in fact make a living planning retirement for their
clients? There are three main reasons:
1. They really like the business. They argue
that thinking and working keeps them sharp. That’s fine. But
if that’s what they really want, I’d recommend doing it with
fewer clients in case something unexpected does happen.
2. They’re greedy. They spent a lot of time
building their clients and their book into a lucrative businsess,
and they don’t want to let it go. But if older advisors really
want to do what is best for their clients, they should start
to downsize their book at age 65, even if they feel great and
would like to work for another 10 years. Maybe their health
will allow this, maybe not. Nobody knows. That’s why we plan
or buy insurance.
3. They can’t find anybody “good enough” to take over.
This is a rubbish excuse and helps defend the advisors clinging
onto these clients until death. Of course every advisor runs
his or her business differently, but you can always strive to
“partner” with someone who thinks about the business in a similar
The odd thing about this attitude is that most of these advisors
also offer life and disability insurance and know people get
sick and die. It’s human nature, even for advisors, to believe
this will happen to other people, not them. It’s great to be
a positive person and a positive thinker, but you need a healthy
dose of reality too. We all come to a point where we can no
longer work, but just because you are self-employed (with no
employer to force you out) doesn’t mean you shouldn’t plan for
this reality. It’s really unfair to your clients not to plan
for this change. Here is one strategy I think makes a lot of
Two-stage retirement plan for advisors
Stage One – When the advisor is 65-70. Financial
advisors who turn 60 should start looking for someone about
35-45 years old to eventually take over their book of clients.
At close to 65 the advisor should sell about 20% of their client
base to this younger advisor. Work with the younger advisor
through the transition. A few years later (67-68), sell another
15%-20%, and at about age 70, another 10%-20% depending on your
health and attitude toward the business. The result of this
planning is that by age 70, over 50% of your clients are in
a new client/advisor relationship that could see them getting
advice for another 25-30 years. That is planning and caring
for your clients.
Stage Two – When the advisor is 70-plus. Many
people today lead productive and great lives past 70, but really
you should look at this time as a time to further step away
from the business and look after just a handful of clients who
want to stay with you until the end, say 15-20 client households.
Move the remainder to your successor when he can handle them.
Work with the younger advisor so long-term clients will trust
him to handle their more complicated situations. You can remain
as a consultant in case the clients or new advisor need your
advice or if it helps with the comfort level. This is a major
and important change for the clients who have dealt with you
for 20+ years in many cases. As a consultant in the background,
the client relationship would still be in good shape even if
something were to happen to you.
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