The Independent Advisor's
Succession Plan

You’re Ready for Retirement, But Are Your Clients?


As a financial advisor, you have probably been saving for your retirement for a long time, and if you have started the succession planning process, you are in an excellent place to retire as planned. However, the same cannot be said for all of your clients. One of the most difficult parts of being a financial advisor is having to tell a client that they do not have the financial resources to retire the way they wish. While this is a tough conversation to have at any point, it gets harder the closer your client gets to retirement. You cannot perform miracles, but if you can intervene even a few years earlier, there are still steps a client can take to salvage some of their retirement dreams. If you are faced with a client who is ill-prepared for impending retirement, here are some steps you can take to help them.

Look for Every Resource

When you sit down with your client, you should start by assessing every financial resource they will have in retirement. Every resource should be taken into account, including any:

  • Qualified retirement plans (401k, 403b, etc.)
  • Pensions
  • Annuities
  • IRAs
  • Investments
  • Social Security
  • Stock options
  • Life insurance (cash value)
  • Interest in a business

You may also consider expected inheritance, but it should not be counted on as a guaranteed resource, as relationships can change and more of a relative’s assets may be required for their care at the end of their life.

Assess Their Retirement Budget

After determining all of the financial resources your client will have at their disposal, it is important to assess their retirement budget. In particular, you should look at their expected spending for areas where you could reduce costs without having too great an impact on their lifestyle. There may be a less expensive yet comparable area for them to move to, for example. Alternatively, they could cut the amount they travel down, and they could downsize their home.

Suggest Working Longer

Your client may dream of retiring early at 62, but if their retirement accounts leave a lot to be desired, they may benefit from postponing their retirement for just a couple more years. With every year they defer retirement, their investments have more time for gains. Additionally, delaying Social Security till 70 maximizes their benefit and allows any of the changes they make to their spending to have a more different impact on their wealth.

There is also a new concept that has become more popular: phased retirement. This essentially means that the client moves to a more part-time role as they near retirement age. They might work fewer hours or have fewer job responsibilities. This may allow them to stay on employer-sponsored health insurance until Medicare kicks in, and is a way for them to generate more income while still having more free time. Alternatively, they may retire from their full-time job and pursue a second career, whether it is starting their own business or working part-time in a field they could not afford to work in before.

Acquire More Risk

Obviously, this strategy should be approached with caution. A client in their 50s should not be investing in high-risk stocks like a 30-year-old can. However, it is a good idea to assess your client’s portfolio at this point to see if the risk/reward tradeoff matches their goals, risk tolerance, and timeline. If they are underinvested, it may be time to adjust their portfolio, though of course, this needs to be done selectively and over time.

Advocate for Downsizing

Downsizing is not only a great way to free up cash for your client’s retirement, it is also a natural step on the road to retirement. As the kids grow up, move out, and start working, needs change. Maybe your client still lives in the five bedroom house in which they raised their children, and now it is just them and their spouse. This is a good time for them to downsize because they cannot justify the cost of maintaining such a large home for only two people. A condo or a small house may be more appropriate for them at this point in their life, and the profit from selling their home could have a lasting impact on their retirement. This is also a good time in life to assess whether that big minivan or SUV is still serving them, or if downsizing to a more fuel-efficient model makes sense.

Start Early

The earlier you plan for retirement, the better. Many people are focused on the saving aspect of planning for retirement, and that is certainly very important. However, having a plan for retirement is also a crucial part of retiring on time and comfortably. Ideally, you will be able to help your client by the time they are in their early 50s. This gives you a decade to discuss with them their current situation, what they can do to start saving more now and help make any adjustments that may have an impact on their retirement. Make sure that all of your clients in this age range are as prepared for retirement as possible by having the tough conversation with them now rather than later.

When you are preparing for retirement, as a financial advisor, it is essential that you have a succession plan in place. This will ensure an easy transition for you, your business, and your clients, and take one source of stress from retirement off of your plate. When you retire, it is your moment to relax and enjoy your freedom. By implementing a succession plan now, you can rest assured that you are not leaving your financial planning firm in the lurch. Contact us today to learn more about the succession planning process.

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