As a financial adviser, you probably rank discussing retirement plans with clients among the greatest pleasures of your professional life. It can certainly produce some heartwarming and rewarding moments.
The instant when a client first understands a comfortable retirement is achievable is especially sweet. The sense of joy which fills the room when the likelihood of early retirement becomes realistic is even sweeter.
But what about your retirement? One of the strangest ironies of our industry is that many advisers devote so little thought to how they might end their own working days and what could happen when they do.
Such shortsightedness isn’t likely to affect only advisers themselves. It’s also likely to have a significant impact on their clients, who are often left in limbo when the shutters come down for the last time – as the Financial Conduct Authority highlighted last year in announcing its review into consolidation in the advice market[1].
This is why advisers approaching retirement should practise what they preach. They have to bring to their own lives the same degree of foresight they encourage in the people who place their trust in them.
In many instances, crucially, this means thinking about succession. The goal should be to pass on a thriving business in an efficient, virtually seamless way that ensures continuity and engenders confidence.
This is by no means easy, of course, but there are practical steps an adviser can take to render succession something close to a non-event. Ultimately, what you need to do is PREPARE.
Step 1: Plan your retirement
Retirement ought to feature in an adviser’s list of long-term priorities from the get-go. Ideally, some kind of plan should be in place from day one – and it should be regularly revisited and revised.
Your preparations should move through the gears as the target date for retirement nears. If you hope to step down at 65, for example, little should be left to chance by the time you hit 60 or thereabouts.
Step 2: Reckon your business
There should come a time when you genuinely resolve to sell your business. This is the point at which you need to carefully evaluate – that is, put a price on – everything you’ve worked to build up over the years.
In doing so, don’t place all the emphasis on present and recurring value. Factor in the future opportunities that might stem from existing relationships and prospective referrals or introductions.
Step 3: Evaluate potential buyers
Succession is usually best arranged privately. You can use an agency to oversee a sale, but there’s no guarantee it will secure you a top price – particularly if it also represents the buyer.
By this stage, if your planning has been up to par, you should have promoted your business sufficiently to drum up a decent level of interest. In turn, this should lay the foundations for an attractive deal.
Step 4: Present your prospectus
Successful networking can make for a small world, as a result of which there’s a reasonable chance your buyer will be someone you already know. Even so, it’s essential to stay fully focused on your task.
All interested parties will expect a solid idea of what you’re offering. This means your prospectus has to be comprehensive, incorporating the likes of accounts, projections and a clear timetable for the way ahead.
Step 5: Agree terms
A verbal agreement normally signals the start of a process that’s likely to take around two years to complete. The precise timeframe will depend largely on your schedule for full retirement.
You’ll also need a written agreement. This must include a breakdown of what’s being sold, the purchase price and period, guarantees and so on. Signing has to take place in the presence of a third party.
Step 6: Retreat from your business
Now the finishing line is really in sight. It’s time to gradually withdraw your services and transfer your business and clients to your successor. The handover should be neither too short nor too long.
This is where the notion of a non-event comes into play. The transition has to be smooth, with no discernible interruption in activity. Above all, at least in terms of service, your clients should scarcely notice.
Step 7: Exit the industry
Exiting isn’t just a question of locking the office door for the final time. It’s important not to leave behind any surprises for your successor before you at last saddle up and ride off into the sunset.
The regulator must be informed of your departure. Needless to say, so must your clients – otherwise they may still feel cast adrift. You might also wish to make quite sure you’ve been paid in full!
Plan, Reckon, Evaluate, Present, Agree, Retreat, Exit – that’s PREPARE. In my experience, it can serve as a useful framework for a truly effective and relatively stress-free succession.
The alternative is an ill-considered and potentially disastrous mess that benefits no-one. You definitely wouldn’t wish that on a client dreaming of retirement, so why risk inflicting it on yourself?
Andrew Goodwin is co-founder and CEO of Truly Independent and the author of ‘The Happy Financial Adviser’.
[1] See, for example, Financial Conduct Authority: “FCA’s expectations for financial advisers and investment intermediaries”, October 7 2024 (https://www.fca.org.uk/publication/correspondence/portfolio-letter-advisers-intermediaries-2024.pdf).
