Financial advisors are trained to help clients deal with their emotions while planning for their long-term goals such as retirement. But when it comes to planning for their own retirement and succession, many advisors are emotionally unprepared.
In fact, only 10% of all advisors have succession plans, George Hartman says in his new book Exit Is Not A Four Letter Word: How to Transition Your Advisory Practice Profitably and Proudly. Another 40% of advisors have only thought about having one, he adds.
Says Kevin Birch, principal, branch and regional development, with Edward Jones in Mississauga, Ont.” “Advisors normally place their clients first, and it is difficult for them to think about succession. Veteran advisors might have been working with their clients for as long as 20 years. And to all of a sudden be moving away from them can be quite challenging.”
Advisors must ask themselves: “What am I going to do with my clients? What am I going to do with my time once I’m no longer running my practice?”
It may seem simple enough for advisors to make the decision to transfer their practice to a new owner. But because most advisors love what they do, many have difficulty accepting the fact that, like their clients, they must be prepared for their own retirement. Regardless of how emotionally attached you are to your practice and to your clients, it is inevitable that one day you will have to retire. So, rather than delaying the decision, you must take control of the succession process. And don’t let your emotions get in the way of prudent planning.
Hartman says that two major dimensions of your life situation must be aligned: you must have both the financial capacity and the emotional enthusiasm to retire. A large part of emotional uncertainty stems from the financial aspects of retirement.
Here are some tips for dealing with your emotions when planning for your succession:
> Seek advice
If you’re running an independent practice, planning your succession is your responsibility. Similar to the way your clients seek your help to plan for their retirement, you should consider enlisting the assistance of a succession coach or expert for guidance on your transition.
Advisors at some firms have access to transition programs to assist with the passing of the torch. For example, Birch says, succession planning is built into his firm’s training program. The firm has a “staged approach” to succession, which takes effect after the advisor has been with the firm for a certain period. “We empower advisors to select their successor,” Birch says.
> Avoid making excuses
Advisors often postpone succession planning by making excuses driven by their emotions. Here are some examples:
“I’m too young to retire.”
“It’s too soon to plan.”
“I’m too attached to my practice.”
“It’s too complicated.”
“I have no idea what I would do if I retired.”
But if you allow your emotions to delay your decision and have to make an abrupt transition, you might end up getting less than the best value for your practice, Birch says.