Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
To buy a copy of Bev’s book, The Pocket Guide to Sales for Financial Advisors, click here.
Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
Dear Readers,
In so many of our coaching and consulting engagements lately we are facing the issue of transition. It’s no surprise, of course, with the aging of the industry. Some teams are working to attract retiring advisors. Still other teams include retiring advisors seeking support to ensure that they leave a legacy for their team and that the hard work they have done goes on for decades after they are gone.
I worked with a large mutual fund company years ago to develop a program on succession planning for advisors and was able to receive patents for the groundbreaking work in this area. After the very intense hands-on experience of the last several months, I’ll share insights and considerations if you are thinking about making a transition, or are working with an advisor who is doing so:
1. If you work with business owners and entrepreneurs in your own practice, you know the way a person feels about their own business is often fairly similar to their devotion to their family. In some cases, the business rises to the top of the list. I’ve had many advisors tell me about the personal sacrifices they have made to grow their business and build a team or a firm.
It’s important to understand this, because a cultural shift happens when the legacy advisor sees the younger team members “inheriting” everything the first advisor worked for. It can be defeating for the retiring advisor to see someone working significantly fewer hours while still able to gain significant income much earlier in their career. Not all retiring advisors see it this way, but be aware it can run deep with some.
2. People don’t like to be told what to do! I have a number of teams right now where the younger team members want the founder/owner of the firm to “set a date.” There are advisors working well into their 60s, 70s and even 80s. Look at Warren Buffet, who just stepped down from his role as CEO of Berkshire Hathaway at 94 years old.
Advisors should have the ability to reap the benefits of what they have grown. And if they want to move on to their next phase in their 50s or 60s, they should be able to do so. However, it’s a dangerous proposition to look at a number and expect someone who owns the firm or is running it to willingly step aside. There are many considerations with clients, finances and “what’s next?” for the advisor. While every team or firm should have a plan in place, you can’t push someone away from what they own and expect they will enjoy being pushed.
3. Having a plan is critical. The above two points notwithstanding, the firm or team certainly need to know what is coming next when the advisor does decide to step aside if they need to do so for health or other reasons. It’s important to have identified the trusted next tier, even if it’s just a few people (in larger teams and firms) who know everything about the business and can take the reins if needed. Identifying these people before there is a crisis can also enable “tests” of the next generation by giving them progressively more responsibility to make sure they are ready when the time comes to lead.
4. Introducing team members into client situations long before the retirement date is crucial. It’s been interesting to watch different teams and firms handle this. In situations where the next gen and the support team have been made a crucial part of the client’s “team” early on in the relationship, there is almost no effect whatsoever on client engagement and retention when the retiring advisor steps away.
However, when the lead advisor has run solo with many of their client accounts and used the rest of the team only as a back office, clients get very wary about change and can resist it. There could be a psychological aspect to this — after all, it feels good to believe your clients think you are irreplaceable. That said, it is detrimental to the longer-term health of the firm and team. When lead advisors include other team members in a very direct and proactive way, it also frees the lead advisor up to focus on growth for the firm.
5. Communication is critical. If you’re not sure of the exact date when the advisor will actually retire, let the team know this. When it comes to open questions about which advisors will inherit which clients and how best to do this, let the team know this. If you’re struggling with certain clients who are very attached to a lead advisor, let the team know this.
I’ve seen far too many situations in which the lead advisor or advisors want everything buttoned up before they share anything. They are concerned that sharing too much information will either send the team into a tailspin or derail their plans. But the more inclusive you are in the process — and the more engagement you create — the better it will be all around for the retiring advisor. If you are the retiring advisor, know that you still reserve the right to make whatever decisions you wish but without input and sharing along the way, you may face some resistance when you start to implement your exit plan.
6. Consider what’s next for the retiring advisor. Depending on the environment — i.e. RIA or wirehouse aggregator – the compensation and extended “trail” of percentage of revenue or ownership percentage will be very different. Of course, it’s important to seek counsel on the best ways for the RFA (retiring FA) to monetize their success, and also for the team or firm to be an ongoing concern and keep everyone employed and paid well. The focus is most often only on this piece of the sometimes-complex puzzle.
The other piece is the next steps for the lead advisor — where do they go from here? They could stay engaged part-time, be chairman emeritus for the firm or be a consultant on some of the larger client accounts. They may be ready to open a doughnut shop, lead a nonprofit, or travel the world several times over. It’s interesting to me how great most advisors are at having these retirement-goals conversations with their own clients, but rarely do they have a plan in place for themselves.
Open the dialogue — have the conversation about what could be and what you want. It could be a chance for an entire next career. I had one advisor I worked with who always wanted to do stand-up comedy but never found the time. Today, post-retirement from leading his very successful RIA, he travels all around doing comedy and is loving it. The world really is your oyster, as the saying goes — open it up and find your pearl!
I’ll continue to address transition issues in this column a couple of times a month. It’s a constant theme in our industry right now, and there are many angles and topics to consider. Write in if there is anything in particular you’d like me to address.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry, in 1995. The firm also founded and manages the Advisors Sales Academy. The firm has won the Wealthbriefing WealthTech award for Best Training Solution for 2022, 2023, 2024 and 2025. Beverly is currently an adjunct professor at Suffolk University teaching undergraduate and graduate students Entrepreneurship and Leading Teams. She is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.
Read more articles by Beverly Flaxington
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
