Why It’s a Bad Idea to Hold on to Your Practice Until You Retire

Many advisors with 30 plus years of service under their belt approach the last phase of their career in pretty much the same fashion. They take their foot off the gas in terms of client acquisition and continue to service their existing clients until they are finally ready to retire. What most advisors don’t know is that this approach can spell disaster for the future of their practice, especially their clients, and can greatly harm the equity they have built in their practice.

Why It’s a Bad Idea to Hold on to Your Practice Until You Retire

Because most advisors stop focusing on growth in their final years of service, they are left with an aging client base. As that client base ages, they either start drawing down on their assets as they enter retirement or transfer those assets to heirs as they pass away or decline in health. This means less assets under management, which greatly decreases the value of the practice. Less value means less equity. Which is why many advisors who wait until they retire to sell their practice are surprised to find that their practice is not worth as much as they thought.

Also, many advisors who wait until retirement to sell are often operating on a shorter timeline. Not only does this put pressure on them and their Successions Consultant to find a successor quickly, but it also puts pressure on the timeline of the transition. This can lead a selling advisor to choose a buyer too quickly without weighing the options and can create a situation in which a hasty transition leads to turmoil for clients and staff.

A Better Approach to Your Advisor Succession

In order to maximize your return and ensure a smooth transition for your practice when you retire, it’s always best to start early. A typical succession can take 1-2 years, but with the growing popularity of “sell and stay” options, advisors can now sell their practice five or even ten years earlier. This allows them to sell when their practice value is at its peak and spend their remaining work years creating additional value for their clients and their successor with the help of the acquiring firm or partner. This also provides clients and any staff with a more gradual and natural transition, leading to less attrition and better client satisfaction.

Just as you would advise your clients to think ahead and make smart decisions about their retirement, it’s important that you purposefully plan your advisor succession. Your practice is one of your largest, if not the largest, asset you own. You want to make sure you sell high so you can maximize the return on the years of hard work you have invested. You also want to make sure that you leave behind a client legacy that makes you proud and ensures that your clients are taken care of moving forward.