Tom Sedoric and Casey Snyder

When your plumber who has kept your toilets flushing happily for 25 years says he is retiring, what is your plan? Demographics and professional transitions have been a topic of discussion on our team over the past few years and should be for your family as well. 

Our colleague and noted demographer, Peter Francese, lectured a number of our key stakeholders almost a decade ago on the professional and demographic challenges facing our nation and our region. Few professionals consider their mortality, but any firm that doesn’t have a succession plan in place may be shirking their moral and legal obligations as a fiduciary to their clients. After all, if any professional fails to practice what they preach, then why should a client trust them or take their counsel? 

This point was highlighted earlier this year with the untimely death of an adviser I know. There was no succession plan in place and the clients and team were faced with an abyss of complications. We also experienced a very capable CPA’s sale of his practice as he slipped into retirement without a viable succession plan in place. Unfortunately, the new accounting firm lacked the customer service skills our mutual clients deserved. 

A recent study on succession planning by State Street Global Advisors, projects that an estimated 70,000 advisers who control more than $2 trillion is assets will retire in the next decade. This is a significant passing of the torch. An estimated one-third of them have no succession plan in place. The number grows to 62 percent for independent advisers. The profession is crying out for better succession planning and regulatory responses are lacking. Though the senior advisor on our team plans on working at least another 15 years, we make it very clear to our clients that we have a solid and dynamic succession plan in place. One reason is to show our clients that we care and take every aspect of our fiduciary duties seriously. We want the accountability of seeing a client’s plan through to the end. Another reason is that providing a plan is ingrained in our team’s DNA. 

There is also an auxiliary benefit. As Todd Clarke, the CEO of CLS Investments recently wrote, having a plan in place can also lead to additional firm growth:

“It gives clients confidence that the firm will be around for their lifetime,” Clarke said. “Clients will be more apt to share other assets, and their children's assets, with a firm that is going to be around for a long period of time than with a 65-year-old financial planner they really like, but who has not clearly outlined or communicated a succession plan.” 

We have found this to be true for the family and friends of our clients as well.

Financial advisors without a succession plan for their practices put themselves, their firms, and their clients at great risk. A survey of 117 financial advisors compiled by CLS Investments, LLC, found that only 19 advisors had completed a formal succession plan for their own businesses. This lack of a long-term plan may explain why half of the advisors in the study say they will not retire until at least age 71, if at all. Furthermore, no one is planning for a sudden or life changing event that is likely to occur.

The same study also revealed that “most expect the sale of their businesses to fund most of their retirement, with 41 percent saying the sale of their business will be between one quarter to one half of their retirement assets, and another 14 percent expecting a sale to make up half of all of their retirement assets.” Many advisors, due to a lack of their own planning, are hoping to win the equivalent of the lottery to fund their retirement. Why should anyone take that bet? While we would all like to win the lottery in our lifetimes we know that very few do. We find it curious that so many financial advisors base their own retirement plan on something equally unlikely. We always welcome the question of “how do you manage your own money and planning?” with transparency and an explanation that our investments look nearly identical to those of our clients in similar circumstances. We are fiduciaries, not gamblers. 

We have been blessed to be mentored by many who preached through word and deed the value of strong fundamentals. These foundations form the basis of being a serious, conscientious fiduciary agent to our clients. We don’t create, update, and communicate our succession plan to our clients because we have to; there are no current regulations protecting investors from advisers who don’t plan for succession or their demise. 

We do it because it’s the right thing to do.

This information has been obtained from sources deemed to be reliable but its accuracy and completeness cannot be guaranteed. The views expressed are those of Tom Sedoric – Partner, Executive Managing Director and Wealth Manager and D. Casey Snyder, CFP® - Partner, Senior Vice President and Wealth Manager and are not necessarily those of Raymond James. Steward Partners Global Advisory LLC and The Sedoric Group maintain a separate professional business relationship with, and our registered professionals offer securities through, Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Steward Partners Investment Advisory LLC. 2985754