A wave of baby boomer advisers are approaching retirement, raising concerns for clients who’ve spent decades working with the same person.Jens Kristian Balle/iStockPhoto / Getty Images
Clients worried about what happens when their financial adviser retires aren’t being paranoid: A new survey finds that while nearly all clients expect the person they’ve hired to get their personal finances in order to have a clear succession plan, most advisers still don’t.
The survey, released this month by Investment Planning Counsel (IPC), found that 91 per cent of clients say it’s important for their adviser to have a succession plan in place. Yet four out of five advisers surveyed don’t have a blueprint in place, even though 94 per cent of them agree it’s important.
This disconnect raises concerns for clients who’ve spent decades working with the same person and expect that there’s a continuity plan for meeting their financial goals.
“If there isn’t a continuity solution, clients could be left without advisers,” said John Novachis, executive vice-president of adviser growth and succession at IPC. He said the lack of planning doesn’t just jeopardize client trust, but creates risks for the client’s family too.
That risk is growing as a wave of baby boomer advisers approaches retirement. “It’s coming to a head now,” Mr. Novachis said, estimating that $400-billion to $500-billion in client assets could be affected. “Advisers are getting greyer, and unfortunately, there’s not a lot of young blood coming up behind them.”
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Many of these baby boomer advisers have worked alongside clients of similar ages, and their children. As trillions of dollars move from one generation to the next over the coming decade, baby boomer clients, who built much of that wealth, are asking tough questions: Who’s going to help my family manage that money when I’m gone?
For retirees, the stakes are especially high. Many are drawing down their savings and navigating increasingly complex retirement income strategies. Losing an adviser without a clear handoff can jeopardize those plans or at the very least cause stress and uncertainty.
The survey found that the biggest client concern is that they will not receive advance communication that they will have to work with someone new. Others worry that a new adviser won’t understand their financial goals or safeguard their investments as carefully. The relationship is often personal as much as financial: More than a quarter of clients said they’d feel sadness if their current adviser stepped away.
There are several reasons advisers put off succession planning, Mr. Novachis said, including uncertainty about who to trust, discomfort with the idea of retiring, and reluctance to lose long-standing client relationships. Many millennial advisers, in particular, feel too young to start developing their own plan, the survey found.
Still, in recent years, an increasing the number of advisers have started or completed a formal succession plan, according to IPC.
Mr. Novachis said that could be because more clients are now raising the issue themselves.
“Clients are starting to pay attention, because they have their own plans,” he said. “They’d like to know who’s going to be their successor adviser.” He recommends clients bring this conversation up during their annual review with their adviser to ensure that both parties are on the same page.