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Is Retirement Catching? Financial Advisers Might Soon Find Out

There’s a paradox in our industry. On one hand, we worry at the number of advisers choosing to “die with their boots on” and neglecting to put an effective succession plan in place. On the other hand, we worry about reports like the one from Cerulli Associates, which suggests that more than one-third of U.S. financial advisers are planning to leave the business over the next 10 years. Once those boomer advisers start retiring, could we see a shift tantamount to Malcom Gladwell’s The Tipping Point? It’s possible—and it could come sooner and faster than predicted.

What might hasten advisers’ retirement?
There are a number of changes taking place both in our industry and in boomer advisers’ lives that could lead them to catching the retirement bug sooner than they expected to:

  • Although many boomer advisers imagined themselves adopting a lifestyle practice, the ripple effects of various regulations, including the Department of Labor’s new fiduciary rule, may cause some to stop and rethink what the future looks like and if they want to go through the hassle of making necessary changes to their practices. It might be easier to get out while the getting is good.
  • Advisers of a certain age may begin to notice that lifelong colleagues, associates, and friends no longer attend industry conferences. These advisers are often the oldest ones at these events, and it may cause them to think twice about attending in the future. This can start them on the slippery slope to falling behind.
  • Increasingly, industry media are focusing on the benefits of technology to our business. Unless they have been diligent about keeping up with the technology revolution, tenured advisers may not be motivated enough to continue learning, leading them to fall even farther behind.
  • Clients, family and friends may increasingly ask boomer advisers when they are going to retire, while former colleagues regale them with stories of exciting vacations to faraway places. Advisers may start to realize that there’s less time remaining in their lives to do the things they’ve always wanted to do.
  • Both physical and mental health become concerns the older one gets. As mental acuity diminishes, advisers may be asked to retire for the good of the business. Or, nagging aches and pains may need medical intervention and extensive recuperation time.
  • When a spouse retires and wants to do things together or needs medical or physical assistance, advisers may be pressured to leave the business.
  • Valued clients may begin to pass away. If these are the same clients from whom the adviser derived a sense of purpose, he or she may feel dissatisfied with the business.
  • Given that the next generation of clients often doesn’t retain their parents’ advisers, and prospects typically want an adviser who will “outlast” them, assets under management may begin to decline. Advisers know that this ultimately affects the value of their business in a negative way, so they may choose to get out early.

This is the reality of growing older in a demanding and evolving industry. And though we’ve tended to believe that many aging advisers aren’t ready to throw in the towel, experiencing one or two of the circumstances on this list can make an adviser susceptible to catching the retirement bug.

But it’s not all bad. Some may be lucky enough to discover that there’s life after being a financial adviser.

Joni Youngwirth_2014 for web

 

Joni Youngwirth
Managing Principal of Practice Management
Commonwealth Financial Network
Waltham, Mass.


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Turning Midlife Uncertainty into Midlife Opportunity

Financial planners know that traditional retirement is a dying concept. As clients are living longer, healthier lives, a new phase of life is emerging—that time after ending a prolonged working phase and before truly slowing down. It’s a time when many middle- to late-age adults are focusing on making an impact, building purpose, and creating a legacy.

According to social innovator Marc Freedman, it’s the time for an encore career, and the organization he founded, Encore.org, is helping millions of adults make those encore careers not just wishful thoughts, but realities.

Freedman will be presenting at the Financial Planning Association’s Retreat 2016 at the Wigwam Resort in Phoenix, Ariz., April 25-28. Register before March 18 to get $100 off.

1. Encore.org is building a movement to tap into the skills and experience of those in midlife and beyond to improve communities and the world. What inspired you to create this movement?

The original inspiration was to provide more caring adults and human capital in the lives of young people who were growing up against the odds. I’d been involved in the first significant study that had been done on the Big Brothers Big Sisters program, and it showed tremendous benefits for young people who were matched with a mentor, but there were half as many kids on the waiting list for the program as were actually being served. And that raised the fundamental question about the untapped talent in society.

And that started this journey, because as soon as you start thinking about the untapped resources of talent in the country today and even more so in the future, it’s hard not to land on older people, so many of whom are looking for greater purpose. And they have a lifetime of experience and the benefits of even greater longevity. It seemed like there was an opportunity in the very specific sense of trying to improve the lives of kids, and at the same time improve the lives of older people who were involved themselves and oftentimes had a deep need to be needed.

So that was the beginning of this idea that there was a great twofer in engaging older people in ways that would build purpose and legacy, and an opportunity for people to live not just longer lives, but lives that continue to matter.

2. What role do you feel financial planners can play in the Encore movement?

An enormously important role.

Research we did last year showed that 4.5 million Americans are already in an encore career—a second act at the intersection of passion, purpose, and a paycheck—and that 21 million more give top priority to following in their footsteps.

And these encore careers, these second acts, last about a decade. So that’s 25 million people who could contribute something like 250 million years of talent to solving significant needs, and yet of the group that’s trying to go from aspiration to action, the 21 million, every time we poll them or do focus groups, the biggest barrier is not having the financial wherewithal to move from the freedom from work—that old retirement dream—to something that more closely approximates the freedom to work, to have greater latitude to do work that’s closer to their sense of purpose but maybe less lucrative than what they were doing earlier.

I think there’s an unacknowledged transition between midlife and this period that’s not retirement, but really another phase of life and work, and people are not well prepared for that transition. I think financial planners can help them do a much better job of being ready.

3. You will be speaking at FPA Retreat 2016 in April. What message do you hope the financial planners in attendance will take away from your session?

That the intersecting longevity and demographic revolutions are producing a new map of life— one with an entirely new period of productivity in what used to be the retirement years. And that’s an opportunity not just for individuals who are lucky enough to be at that phase today, but for younger generations who need to plan for a longer distance race than those of us in our 50s, 60s, and 70s today ever thought was possible.

And that ultimately, if the financial planning profession and other parts of society help this group realize their desire to continue to be productive, engaged, and living meaningful lives, that we’ll all benefit, and that we’ll have a richer, more productive society now and for generations to come.

Look for the Journal of Financial Planning’s full interview with Freedman in the April issue.

Schulaka Carly_resizedCarly Schulaka
Editor
Journal of Financial Planning
Denver, CO


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Anticipating Change in Your Business

Nothing is predictable—in life, the financial markets or our industry—except, of course, change itself. Let’s explore a few somewhat predictable events that tend to bring change, for better or for worse, to advisers’ practices.

“Man, Woman, Birth, Death, Infinity”
If you recognize that quote, you’re probably in your 60s and remember the popular TV show Ben Casey. The series opened with the elder professor teaching his physician protégés about the path of human existence. From the birth of a child through adulthood, procreation, health issues and ultimately death, the trajectory of life is fairly predictable.

Whether they happen to you or a family member, colleague, employee, client or friend, these life events can have an impact on your business. For example, the birth of a child may prompt a young employee to quit work or ask for paternity leave. The 60-year-old adviser may take time off when her first grandchild is born, while the 40-year-old might buckle down and focus more than ever in anticipation of college expenses ahead. When you think about it, the path of human existence is constantly affecting your practice in some way, shape or form.

Leases, Partnerships, Growth, Industry Evolution
You haven’t heard that list on any TV show, but these factors also lead to change at regular intervals throughout the life cycle of a financial advisory business.

  • The end of a lease. I’ve noticed that a lease coming up for renewal can be a crossroads for many advisers. For one, it may present an opportunity to buy the office building; another may see it as a chance to gain space for targeted growth over the long term. One adviser will simply renew the current lease, while another may take the opportunity to minimize office expenses.
  • A shift in a partnership. Partnerships evolve, too. As one partner experiences change due to personal factors such as those mentioned above, it can be like shifting tectonic plates in the partnership. Say one adviser has a health scare and the more reticent partner takes the helm of running the business. The emotional dynamic caused by the shift is palpable. At such junctures, lifelong relationships between colleagues can unravel or thrive.
  • Business growth. Whether an adviser’s success is due to skill, geography, luck, inheritance, passion, the market or other factors, at some point, it becomes clear which firms are consistently growing and which level off. In either case, inertia kicks in; the business in motion tends to stay in motion.
  • An evolving industry. Like individuals, industries are born, change and pass away. Time will tell how long the financial advisory and planning industry endures. Advisers who joined the profession 40 years ago, 20 years ago and today will face very different circumstances to which they must adapt.

What Changes Will Your Practice Confront?
Change is constant and often predictable. But it’s easier to see that when you’re looking in the rearview mirror—just ask any adviser in the second half of his or her career. For those still in the early stages, it’s worth keeping an eye out for all the predictable changes down the road. As the saying goes, we don’t get hit by the things we see coming!

Joni Youngwirth_2014 for webJoni Youngwirth
Managing Principal of Practice Management

Commonwealth Financial Network
Waltham