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.
Managing Principal of Practice Management
Commonwealth Financial Network