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Help The Elderly—On Your Staff

Advisors have been retiring for years, of course. But now, with the huge baby boom cohort beginning to head for the exits, the issue is a big one, to wit: How to help older brokers keep their businesses alive? What is the best way to transition their businesses into the future?

Advisors have been retiring for years, of course. But now, with the huge baby boom cohort beginning to head for the exits, the issue is a big one, to wit: How to help older brokers keep their businesses alive? What is the best way to transition their businesses into the future?

Not everyone needs help, of course. A number of older reps still actively pursue new, younger clients. Some bring in family members (or find partners) to help garner new business, and, one day, take over the relationships they’ve spent decades carefully building. But, there are enough older advisors with no business succession plans that branch managers, who are ultimately responsible for their accounts, are growing increasingly concerned. A 2004 study by conducted by Seattle-based Moss Adams LLP found that roughly 20 percent of advisors still let their practices die slowly or just close their doors when they're ready to quit.

“Older brokers frequently don’t have the income needs of their younger counterparts,” says Stewart Lee, chairman and CEO of Lee Training, LLC, a leading provider of management and consulting services to the financial services industry, based in Wellston, Okla. “So, the urgency to produce isn’t necessarily there anymore.”

He adds, “I think this industry lags behind others when it comes to helping employees with exit strategies.” (Lee developed “The Branch Manager Training Program” for SIFMA and other organizations.) This, he says, is where the branch manager may want to intervene—for everyone’s benefit. “We can help the broker, the clients, the firm, and branch profitability. You don’t want to have to relegate a seasoned advisor to a desk outside of an office because he’s not producing enough. You don’t want to lose his clients—or their children. But, the situation is salvageable.”

Into The Sunset—Clients Too

“Many times, the intention is to retire gracefully,” says a regional BOM in the northwest who asked that his name not be published. “But, that’s probably not the best thing for the broker—and it’s certainly not best for his clients.”

If older reps don’t plan a transition package, what will happen to their clients down the road? “It’s important to remind them that the accounts they’ve devoted so much time to will end up being redistributed around the office,” Lee says. “That’s not what’s best for their clients.”

And clients know that. Indeed, clients worry when their brokers get older, says one BOM in New York, who also spoke on the condition that his name be withheld. “[Clients] want to see continuity within a practice for themselves and their heirs.” He warns, “It’s actually a great way to lose clients [to other firms].”

Many firms provide (at least some) succession planning services—well, at least for their top-tier reps. Smith Barney, for example, has its Franchise Protection Program, that helps reps who meet certain production and tenure requirements to plan for the future; the program even has provisions to help the reps retire but continue to receive a trail. Others, such as UBS, Merrill Lynch, Edward Jones and American Express, offer planning resources, but they are far from formal programs. For example, Merrill initiated a Financial Advisor Death Benefit Program in January, which goes above and beyond standard accidental death insurance.

“Most brokers are self-aware enough to know they’re no longer growing,” says a wirehouse BOM in Boston. “But, they seem to want to die with their boots on.”

Jeffrey Korzenik, a former wirehouse BOM who heads Salem Five Financial Investment Services, a boutique wealth management firm in Salem, Mass., agrees, noting that the first step is initiating a conversation with certain reps. “It’s not an easy thing to do,” he admits. “Everyone’s uncomfortable. You don’t want to hurt anyone’s feelings. And, you don’t want to be the target of an age discrimination complaint.”

He recalls his former wirehouse manager hosting an appreciation lunch for the office’s older brokers. “He applauded their many years of service and dedication. But, he said it was important that they maintain a certain level of production going forward. They all shared ideas on how to do it. After that, one guy who’d been a rep for 50 years did a record $800,000 in production just by stepping up his own activity.”

Korzenik’s advice: “Start by expressing your respect for older advisors’ years of service, dedication, production, loyalty to the firm and to their clients. Then, simply ask what their intentions for their business are down the road.” When this is done in an atmosphere of complete respect, he says, “You’re just opening the door. It’s a very neutral question. If they don’t have a plan, you can mention options like franchise protection, bringing in a partner or creating a team. It kind of sets the ball in motion.”

Since BOMs are the stewards of their branch’s clients and assets, Lee says they must move beyond the fear of upsetting the apple cart to do what’s best for the clients. He suggests approaching older reps about the legacy they want to leave, and how the right partner or team can ensure their business will continue on in the way they would want it to.

There's also the option of selling the book to another rep in the office (if the firm allows it). “I’m not a big proponent of reps selling their books at the last minute,” says a regional branch manager from the south.“It may work out alright for them, but I don’t know how happy their clients will be about the though of being ‘sold.’”

“No client wants to feel he’s part of a fire sale,” says Lee.

Korzenik stresses that these reps possess invaluable attributes from which the entire office can benefit. “It’s great to be able to keep them around. They’ve seen the market go through so many cycles and can offer important perspective on the industry,” Korzenik says. “If they’ve been with your firm or branch for a while, they’ve seen plenty of managers come and go and are, in essence, the ‘keepers of the branch culture.’ They also tend to have many established and valuable connections within the firm. And, if careful plans are made for their clients’ futures, [older reps] usually attracts future generations.”

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