Not much has changed in our industry relative to succession planning. Advisors are still aging and the number of people joining the profession is still low. And we continue to see a large number of advisors operating their firms without a plan for retirement.
More than half of advisors are approaching or already in retirement age. According to a recent study by Cerulli1, the average age of financial advisors in the United States at the end of 2017 was 52 years old. Add 2 years to account for 2019 and the average age is approximately 54 years old.
More to the point, despite all the industry conversation about planning for retirement, very little planning had been done. David Grau, president of FP Transitions says “Solo practitioners generating about $250,000 in annual revenue who are happy to manage assets and do financial planning for clients they’ve grown up, typically have no succession plan. Grau says they represent about 70% of the industry.”2
Having no plan may work for those who plan to “die with their boots on”, but for advisors who plan to retire and enjoy the lifestyle they have worked so hard for, the question is not “if” but “when”. The problem we are observing with these advisors is that they often leave the planning for retirement until they are ready to walk out the door. Then they are quickly dissatisfied to learn that at exactly the time they are ready to retire, they face another 2-4 years to identify a buyer and transition their practice.
Those who plan to “die with their boots on” (no succession plan required) often run into the same issue when life happens. Life is good until an unexpected illness of a loved one, a premature death of a friend, or a chronic condition that leaves you unable to work the same way as you have always done – and causes them to recalibrate priorities and decide to retire.
The right solution is out there if you take the time to explore your options. We have found in working with advisors through our PRISM program that beginning to plan at least 3 to 5 years in advance of when you think you might retire is best. Early preparation means that you will have the choice to leave at your chosen time, to leave earlier than planned when life happens or to delay retirement for a few more years. In fact, we recommend that advisors begin exploring their options when they are in their early sixties regardless of whether their expected retirement date is in their sixties, seventies or eighties.
As the year winds down, you may find yourself thinking about winding down your career. Is now a time to explore your options? Don’t forget to leave yourself enough time to put those plans in place.
1Cerulli Associates “Advisor Retirements Expect to Set More Than One-Third of Industry Assets in Motion” November, 2019
2CNBC.com “As advisors start to ‘age out’, firms look to step up succession planning” October 29, 2019
