The new normal of succession planning

As more people work past the traditional retirement age, what does that mean for succession plans?

Nov 12, 2018 @ 5:06 pm

By Joni Youngwirth

Advisers across the industry have been encouraged to get their continuity and succession plans in place. By and large, they've heeded the advice.

Still, advisers approaching retirement see the same statistics they show their clients about more people working beyond the traditional retirement age. And like their clients, they, too, want to remain relevant. This has many advisers reconsidering when to stop working or what type of career to pursue next.

How does this changing viewpoint affect the established succession plan? As you might imagine, some advisers who have found a successor, trained that individual and have confidence in his or her ability to lead the business may be having second thoughts. They may put off signing the buy-sell agreement, which, in turn, puts them at risk of losing their heir apparent.

On the other end of the spectrum are the younger advisers who expected to become part of a partnership but are instead left holding the bag for everything — seeing clients, running operations and developing new business. They assumed they would be working alongside the tenured adviser, but the tenured adviser is out pursuing new dreams.

The age factor

One issue that plays into these scenarios is the ages of the tenured adviser and the new adviser. Although age alone does not account for maturity, experience or confidence, it can influence the success of transitions. Consider these two scenarios to see what I mean.

The founding adviser of a firm is 66 and the Next-Gen adviser is 27. The senior is anxious to shed much of the daily work and assume a more flexible schedule, perhaps by working fewer days per week or even taking off weeks or months at a time. But at 27, is the younger adviser ready for and receptive to such a level of responsibility? Does the younger adviser want the senior to totally disappear from daily operations?

Or take the case of a 57-year-old adviser who brings on a 37-year-old replacement. The replacement may be eager to spread his wings and try his hand at running all aspects of the business, but the senior adviser is in her prime and has no intention of letting go of anything substantial for the foreseeable future.

These cases are polar opposites, but both are influenced by the age factor. In one, the younger adviser wants and needs the close, ongoing presence of the senior adviser. In the other, the younger adviser wants the senior adviser to transition the business and have less of a presence.

Now combine either scenario with an adviser who is simply not ready for retirement. This adviser may be financially prepared but hasn't figured out what to do with life afterward, an in-between state that would resonate with many clients nearing retirement.

Difficult conversations

So how can advisers make sure they're doing the right thing in these situations? Here are a few guidelines:

• Senior advisers: Be clear with younger advisers about how many hours you intend to work, as well as how much of that time will be devoted to being a financial adviser versus pursuing your next career. Outline the periods when you will be absent, whether for travel or other passions, to help set expectations among all parties, including spouses or significant others. If retirement is on the horizon, develop clarity around what that looks like: What will be your purpose, how will you use your time, what passions will you pursue?

• Younger advisers: Be sure your senior adviser understands how much you expect him or her to be present and participating in the day-to-day business. Suggest that you both put together job descriptions that articulate the responsibilities and roles you will play. Consider revisiting these descriptions every six months to make sure you're still on the same page.

With clarity comes understanding and a more effective working relationship. Whether you're an older adviser who's winding down your first career or a younger adviser reaching your peak, your partnership is evolving. You are entering a new situation. Be flexible, open and honest, and be prepared to address challenges as they arise.

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