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Help Your Clients and Your Practice: Retirement and Succession Planning for Financial Advisors

Help Your Clients and Your Practice: Retirement and Succession Planning for Financial Advisors

November 21, 2023

Retirement planning is a crucial aspect of financial well-being. Yet there’s fresh evidence that the best laid plans often get preempted by important life events. A recent survey by the Employee Benefit Research Institute (EBRI) highlights a significant disconnect between retirement expectations and realities.

According to the survey, 46% of respondents retired earlier than they planned, primarily due to factors due to hardship, such as a health problem or disability (35%). The consequences of unplanned retirement transitions can be severe, resulting in financial strain, reduced quality of life, and increased stress.

Financial advisors should take a good look in the mirror after studying these findings, because the disconnects between expectations and realities often extend to their own situations. Many advisors fail to implement succession plans, leaving their firms vulnerable to unexpected disruptions. The absence of a well-structured succession plan can lead to a scramble to maintain client relationships, manage ongoing investments, and honor commitments to the advisor's family. For financial advisory firms, the lack of a succession plan can result in client attrition, reputational damage, and financial instability

Be Proactive About Retirement

To address these challenges for their clients and their own families, financial advisors should take proactive steps to ensure a smooth transition into retirement.

Financial advisors can play a pivotal role in helping individuals bridge the gap between their retirement expectations and reality. By providing comprehensive financial planning and guidance, advisors can empower individuals to make informed decisions that align with their long-term goals. Here are some key steps financial advisors can encourage their clients to perform to enhance their retirement planning:

  1. Set realistic retirement goals and expectations. Consider the client’s desired retirement lifestyle, anticipated expenses, and potential sources of income.
  2. Encourage the client to regularly review and update their retirement plan. Account for changes in your income, expenses, and life circumstances.
  3. Provide personalized advice and help the client develop a sound retirement strategy.

The Importance of Succession Plan Development for Financial Advisors

Financial advisors, on the other hand, should develop comprehensive succession plans that identify potential successors, establish clear communication protocols, and ensure the orderly transfer of client relationships and assets. For financial advisors, effective succession planning involves:

  1. Identifying and grooming potential successors. Develop a pipeline of talented individuals within the firm who can assume leadership roles in the future.
  2. Establishing clear communication protocols. Ensure open and transparent communication among partners, employees, and potential successors.
  3. Documenting key processes and procedures. Create detailed manuals and guidelines to facilitate the transfer of knowledge and responsibilities.
  4. Seeking legal and financial counsel. Consult with experts to ensure compliance with relevant regulations and protect the interests of both the firm and its clients.

Succession planning, an essential aspect of a financial advisor's practice, ensures the continuity of client relationships and the preservation of the advisor's expertise. A well-structured succession plan not only safeguards the advisor's business but also ensures that clients continue to receive quality financial guidance throughout their retirement journey.

At Cutter & Company, you can work with the successor you choose, pick a person or team within the firm, or if no successor has yet been identified, you can create a succession plan directly with the firm.  Don’t wait until your anticipated retirement date to set your plan in motion.  Even the best laid plans may not be realized if/when an unexpected event occurs in your life.  Cutter & Company can help you create a succession plan that best fits your needs.