Many advisors either plan to retire with no succession plan, or they don’t plan to retire at all. While this would not be a viable option for many business models, it actually is a decently profitable option in the case of financial advising, which is why many advisors choose not to make a plan. In this scenario, the business won’t survive past the lifespan of the advisor. It’s likely that the practice will gradually taper off through attrition as the advisor experiences health problems and suffers lower energy levels with advancing age. The clients will be left to make their own individual decisions on where to take their accounts.

 

Therefore, closing down the business is more of an exit strategy than a succession strategy. No one is here forever, so some kind of exit will have to be made sooner or later. Planning what we want our retirement to look like doesn’t slow the march of time, but it does give us control over what those days will look like in our older years.

Pros

  • You don’t have to think very much about succession planning.
  • Letting the business taper off is something that feels natural and can help you to cope with the emotional aspect of parting from the business you’ve worked so hard to build.
  • It’s not necessary for you to take the responsibility of overseeing all of your clients through the difficult transition of moving their accounts to the successor. Each client will do this for himself or herself.

Cons

  • You will retire on savings, but you will have little continuing income from the business, an option that would have been possible in other retirement models.
  • It’s risky to bank on the best-case scenario of continuing good health and energy for many years. The plan doesn’t work if there’s an unforeseen health crisis, accident, or other emergencies.
  • Many financial advisors have only a life insurance policy for their family to fall back on if something should happen to them, which is not the most robust strategy to have in place.
  • The asset you’ve worked so hard to build simply disappears, leaving less of a legacy for your children of your life’s work.
  • Your clients may not end up in a place that is quite as good for them as they would have if you had helped by walking them through the transition.

Next Article: Acquisition

advisorRETIRE is here to help you to plan effectively for your retirement, provide maximum business continuity to you and your customers through your retirement process, and give you options that maximize the value of your practice as you head toward retirement. Learn more about our flexible succession planning opportunity for independent financial advisors, and contact us today.

 

  • WE DO DOCUMENT PREPARATION

    Our documents allow for a customizable program designed only for you.

     

  • SEAMLESS INTEGRATION OF CLIENTS

    We apply our proprietary service meeting processes to ensure a smooth client transition.

  • WE DO DOCUMENT PREPARATION

    Our repapering services allow for you to continue business as usual.


     

  • SEAMLESS INTEGRATION OF CLIENTS

    We apply our proprietary service meeting processes to ensure a smooth client transition.