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With the average age of financial advisers in the U.S. hovering around 55, and about 20% of them age 65 or older, chances are that your adviser will be retiring sooner than later.
Depending on the size of your retiring adviser’s firm, you may be assigned to another planner within the company or referred to an outsider who’s either acquiring the practice or operating independently.
Consider this an opportunity to reassess your financial planning goals and identify the best way to fulfill those needs. Importantly, rather than simply accepting the replacement, do your due diligence to determine if this new relationship will work for you.
Ideally, your outgoing adviser has already laid the groundwork by introducing you to the new planner and encouraging you to build rapport. Perhaps your adviser has gradually stepped away to let your relationship with the newbie develop.
In any case, it’s important to meet the new adviser and make sure there’s a good fit, says James Lee, a certified financial planner in Saratoga Springs, N.Y. Over several conversations, get to know the planner personally and professionally.
“You’ll want to talk about the process they use to serve clients, their investment philosophy and the team members they work with” such as accountants and estate planning attorneys, Lee adds.
The announcement of a trusted adviser’s retirement can prove disappointing to satisfied clients. Even if they come to expect the news, they may still feel pangs of anxiety at the thought of establishing a bond with someone else.
Empathetic advisers understand the stress that their retirement can cause. They are especially careful not to pressure clients to stay with the firm.
Lee knows an adviser who recently retired and managed the situation well. He laid out the options for his clients and let them decide how to proceed.
“Most of his clients stayed with the financial planning practice,” Lee said. “For those who left, the retiring adviser recommended an outside adviser” they could consider.
Some clients may elect to jump ship because of changes in the terms of their relationship with the firm. For example, a new adviser may set higher account minimums or modify the level or type of service that clients receive.
A changing of the guard may present mildly disgruntled or restless clients with a chance to rethink their needs. Perhaps they’ve been pondering the benefits of using a lower-cost fintech platform or robo-adviser, but were not inclined to sever their existing relationship.
“Sometimes, a retiring adviser serves as an excuse to make a change,” said Michael Silver, founder of Focus Partners, a coaching and consulting firm in Paramus, N.J. “It gives the client a convenient out” to leave the firm.
If you decide to stick with the same company, it’s not enough to feel comfortable with the new adviser. Evaluate the support staff assigned to service your account.
A different adviser may bring aboard a different administrative support team. Get to know them, make a few initial requests and see if they’re competent and responsive.
Retiring advisers can orchestrate a smooth transition by taking three preparatory steps, Silver said.
First, create a detailed file of each client to give to the new adviser.
“The dossier should include how the client came to the firm,” Silver said. “You may find that a CPA has referred a lot of clients, so a new adviser needs to know that” and maintain strong relationships with key contacts and centers of influence.
Second, outgoing advisers should check that their successor intends to follow similar portfolio management principles. Otherwise, clients can be blindsided by a newcomer’s asset allocation calculations or stock-picking methodology.
“Look at your investment matrix and make sure the new adviser will manage money the same way,” Silver said.
Third, confirm that your service model will remain in place. If clients expect quarterly review meetings, for instance, set up systems to ensure they continue to receive the same level of engagement throughout the year even if you’re not around.
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