“Who should I talk to about identifying a succession partner?” is a common opening question I hear from advisors when they call Commonwealth’s Practice Management department to inquire about starting the retirement process. But I think these advisors may be putting the cart before the horse. The first question advisors really need to answer is “Am I ready to talk about retirement?”
Are You Ready?
Answering the readiness question sets the stage for the type of succession plan you’ll want to put in place. It can help you identify the key attributes of an appropriate succession partner and begin the process of articulating what the next chapter of your life holds for you. An inability to answer “Am I ready?” probably means that you should wait until you can answer the question clearly—and with enthusiasm—before having any conversations with prospective partners.
Retirement as we know it is a relatively new construct. Prior to the mid-20th century, people worked for their entire lives, stopping only when health prevented them from continuing on. With the introduction of social security and the cultural embrace of retirement as a life stage, we now expect people to retire. Not only that, we expect that they will want to retire and stop doing what they’ve been doing for years to . . . do what? What does retirement mean?
Financial advisors are fortunate to be in a profession that relies on intellectual rather than physical capacity to deliver their services. As long as an advisor’s mental capacity is sharp and clear, there may be no compelling reason for him or her to stop working—assuming that the advisor enjoys all that the profession entails. For these advisors, retirement has no appeal and succession planning is not the priority. Planning for the unexpected is, though; and as I discuss in this Commonwealth Independent Advisor blog post, identifying a continuity rather than a succession partner is a different conversation altogether.
If You’re More Ready to Retire Than Not . . .
If you aren’t among the advisors who want to continue conducting financial planning analyses for several more decades, you’ll want to consider two more questions:
- Have you disengaged emotionally from your firm?
- The more you can see your firm as an investment rather than a lifestyle, the more prepared you will be to evaluate the value of your book of business to prospective buyers and engage in productive due diligence and negotiations.
- How heavily do the proceeds from the sale of your book weigh on your financial well-being in retirement?
Your answers will help you frame your succession plan as a phasing-in process or as a one-and-done event. They will also help inform you as to whether the sale of your business would be best suited to an internal (if available) or external buyer.
Your Next Chapter
You’ll then want to start planning the next chapter of your life!
- What will you do? Hobbies will certainly be a part of your life, but you likely won’t want or be able to golf, hike, swim, or play the piano every day for the majority of the day.
- How will you define your purpose?
- What will your contribution to society, your community, your family, and affinity groups look like?
- With whom will you surround yourself?
- How will you structure your days?
- What will success look like for you?
It’s a lot to think about, but there’s no time like the present to consider how to craft the future you envision. When you can answer the first question without feeling that you’ll be leaving something behind, you’ll find yourself moving toward an exciting and vibrant future.
Maria Considine King is vice president, practice management, at Commonwealth Financial Network®, member FINRA/SIPC, an independent broker/dealer–RIA.