Emeritus

How to Tell Your Financial Advisor Has Retired But Forgot to Tell You

Have you ever seen the word ‘Emeritus’ after the name of a professional? Attorney, Emeritus. Shareholder, Emeritus. Professor, Emeritus.  It means that this person has retired but maintains an honorary role based on their lifetime of accomplishments.  One title you will rarely see: Financial Advisor, Emeritus. Why is that? 

Financial advisors are facing a retirement crisis.  40% of financial advisors expect to retire in the next ten years. The problem is, our industry does not have enough young advisors to replace those looking to retire. This is the residual effect of the Financial Crisis and a lack of hiring over the last decade. An advisor’s decision to retire, keep working, or phase out over time is something of which you, as the client, should be aware, but that is not often the case. More likely, it will be up to you to determine if the person entrusted with your financial life has quietly stopped working. 

In other professions, such as accounting and law, practitioners are compensated based on the tasks they complete. Attorneys bill at an hourly rate, many times providing itemized invoices down to the quarter-hour. Accountants bill clients once tax returns are completed and filed.

The financial advice business is different, however. Many advisors have moved over to a fee-based practice where they charge a percentage of assets under management to earn their keep. This has been a positive development over the old, commission-based model as it better aligns the interests of advisor and client. Under this percentage model, the advisor has an incentive to protect and grow the clients’ assets. There is a measure of accountability required, though, to make sure the advisor is earning his or her keep. In a fee-based model, the advisor could scale back his or her workload and ease into retirement while still collecting fees.

Recently, we have encountered families who tell us that their advisor has not called them in years, has brought on a next-gen advisor for a rapid succession, or has moved to another state and forgot to tell them!  The fee-based arrangement has allowed for this ‘ghosting’ because the advisor still gets paid, whether they are at the wheel or not.  

This can happen because it is not in anyone’s interest for the advisor to formally retire, as long as the clients stay. From the parent brokerage or bank’s perspective, as long as the advisor is happy and the clients stay put, they are not going to press the issue.  If the advisor wants to live his best life while clocking 20 hours a week and charging what he charged in his prime, the company is happy. And, as we noted earlier, there may not be an obvious successor to take over.

The impact on you as a client can be benign…until it’s not. You may have trusted this advisor for many years, having navigated your professional and personal lives together. The advisor has known your hopes, dreams, and fears through the ups and downs of life. Except now that knowledge and experience is increasingly disengaged at exactly the time you need it most: Your own retirement.

How can you tell if the person entrusted with your financial plan is retiring without telling you?

  • They are spending as much time golfing and travelling as you are. 
  • They have a junior advisor in place who has not taken an active role in your relationship. A good successor would be taking the lead several years before the senior retires.
  • They have moved to another firm late in their career.  This may have been their chance to ‘monetize’ their business with the intention of walking away for good.

Hopefully, this does not describe your advisor, but the average advisor is graying, and it is natural that thoughts of retirement are emerging. If you have a hunch your advisor is thinking about retiring without telling you, ask these questions:

  • What is your succession plan? Are your successors the kind of competent professionals who can serve me well?
  • Do you plan to retire on a specific date, or will you phase out over time? Will you let us know when the phasing begins?
  • What is your parent company’s policy on advisors retiring? Is there a mandatory age or a plan for transition that is enforced from above?

A good retirement plan for your advisor should include a good outcome for you as well. Asking proactive questions now about your advisor’s plan can help you avoid asking later: “Who is minding the store?” If you suspect you may be paying your advisor while he has your financial life on autopilot, give us a call and we can review your situation.


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