As a registered investment advisor, you extoll the virtue of your planning skills.  You explain to prospects and clients the value of having a comprehensive wealth management plan.

You have regular meetings with clients to insure they’re on track with their plan.

You explain the importance of using a registered investment advisor because you’re required to avoid conflicts of interest and to resolve any unavoidable conflicts in favor of your client.

It’s ironic that many of you fall short in your own practice and, as a consequence, may even be in breach of your fiduciary duty.

Lack of succession planning

According to some studies (based on 2010 data), only 29% of advisors had a defined succession plan in place.  More troubling is a Cerulli study  (discussed here) indicating that 59% of advisors who are within five years of retirement don’t know who will purchase their practices.

A relatively small percentage of advisors in the U.S. are under 40.  The average age is 50.  Almost 21% of advisors are over 60.  These older advisors manage a majority of their firm’s assets, aggregating $2.3 trillion.

When our digital marketing firm engages in the discovery phase prior to writing new content for the websites of our advisory firm clients, a question we always ask is: What’s your succession plan?  More often than not (especially with smaller clients), the answer we get is:  I don’t have one or I haven’t had time to focus on that yet.

This could be a huge problem for your clients (as well as for your loved ones).  A 60 year old has a 15% chance of dying before reaching age 70.

Your chance of being unable to work due to disability is much higher.  Almost 20% of all Americans live with disabilities.  About 38 million (10% of all Americans) live with severe disabilities.  This data includes all age groups.  According to the New York Times, About 32 percent of women and 18 percent of men in white-collar jobs who have bought individual disability insurance will at some time in their working lives require a 90-day or longer disability leave.

Adverse consequences

We all like to deny unpleasant contingencies.  Ask yourself this question:  How would your clients cope if you died or were disabled?

Here’s a more controversial inquiry:  When discussing potential risks as part of the financial planning you do for your clients, are you obligated to disclose the fact that you have no succession plan in place?  Isn’t that a risk that could adversely impact them?

You owe it to yourself, your clients and your loved ones to put a succession plan in place.

Resource of the week:

I recommend you read this report by Accenture entitled: Advisor Succession Planning.