FA Center: What to expect — and watch out for — when your financial adviser retires


Investors get used to their financial adviser. They grow accustomed to comforting routines — meeting periodically to review their financial plan, receiving holiday gifts or birthday cards — and take the relationship for granted.

Then one day, they learn their adviser plans to retire.

Ideally, advisers pave the way for a smooth transition. They designate a successor and assure clients they’re in good hands. But there’s no guarantee that clients will stick around. Some may reassess their need for an adviser and decide to manage their own portfolio. Others may figure it’s time to shop for a new firm or consider lower-cost digital fintech platforms that offer financial planning and investment management.

With the average age of an adviser around 55 — and with roughly one-fifth of advisers older than 64 — the need for succession planning looms larger. As advisers retire, they want to create continuity for clients by grooming someone to replace them.

It’s a dicey topic for some advisers. They may not want to grapple with retirement, much less discuss it with clients. Meanwhile, clients might privately wonder when their aging adviser will retire, but usually won’t bring it up. In a recent survey by SmartAsset, only about one in four advisers say that clients ask about their firm’s succession plan.

“Advisers [approaching retirement] should talk to the client about their succession plan on a regular basis so that the client is informed and knows what to expect,” said Brooklyn Brock, a Tulsa, Okla.-based certified financial planner whose clientele is entirely comprised of advisers. (Yes, even advisers sometimes hire an adviser.)

When counseling advisers on succession planning, Brock finds that they know they need to devise a transition strategy. But “they don’t think to tell clients,” she says.

Succession plans can vary. In many cases, advisers designate a handpicked star to replace them. In the months and years before the handover, they introduce their successor to clients and gradually delegate more responsibility. As a result, clients get to know and trust the newcomer in stages.

“It helps when the [soon-to-retire] adviser talks up their successor,” Brock said. Expressing an enthusiastic endorsement signals to clients that the changing of the guard should benefit them.

If an adviser intends to sell the practice to outsiders, arrange for top clients to meet privately with the lead partners who are acquiring the firm. Brock also suggests hosting a social event to give clients a chance to meet the new team.

“You want to make it a more personal connection,” she said. “Let the client know you’re excited to retire” and why you’ve sold the practice to the new owners.

Brock’s father, also an adviser, recently announced his retirement. Due to medical issues, he retired earlier than he originally intended — in his late 50s — and sold the business. “Even though it happened quickly, my dad had a plan,” she said. “He told clients in a way that built trust from the buyer’s and seller’s perspective.”

Her father and the new owners met with clients one-on-one, emphasizing their shared goal of continuing to deliver seamless service. “They started with clients my dad was closest to,” she said. “There were some tears. But by joining these meetings, the buyers could have the conversation together with my dad” and field questions in a coordinated, reassuring manner.

Sharing a timetable for the changeover also helps clients know what to expect when. It gives them a chance to prepare for the new regime. And if they perceive a well-orchestrated plan in place, they’re less likely to jump ship.

In casual comments, the outgoing adviser should express faith in the successor’s skills and temperament. Noting the newcomer’s attention to detail or specialized training, for example, indicates to clients why you’re confident they will continue to receive superior service.

Remember, it can take time for a fresh relationship to blossom. “The new adviser may have different work habits,” Brock said. So the more you can expose clients to the successor early on, the better.

More: I’m a financial adviser, and I’d discourage you from putting bitcoin in your 401(k)

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