KEY TAKEAWAYS:

• Retirement planning is an ongoing process of assessing, strategizing, and adapting to change, and your advisor is your key thinking partner and guide.
• Much time is invested in building a relationship of trust and mutual understanding, which is key to building the confidence you need to execute your plan and to your advisor gaining the familiarity necessary to guide you to outcomes that match your values and retirement vision.
• Chronic financial advisor turnover in the industry threatens to disrupt the immense benefits advisor continuity can bring, but you can take precautions to safeguard against this risk.

Proper retirement planning is more than a transaction.  It is more than a superficial 60-page Monte Carlo report anyone can run for you.  Retirement is the toughest financial challenge most individuals will ever face.  It requires converting your life’s accumulated savings into a 30+ year stream of sustainable retirement income in the face of many unknown and constantly shifting variables.  

Retirement is not just something to check off your list; it’s a hugely important substantial period of your life where you will face many changes and challenges (and hopefully much joy and enjoyment along the way).  Retirement planning is therefore an ongoing process of assessing, strategizing, and adapting to change. And that’s why it’s so important to consider who will be by your side to help you plan for and adapt to these changes with as little stress as possible.

Your Advisor is Your Thinking Partner and Guide

Retirement planning is administered through a financial advisor, preferably one who specializes in retirement planning.  You will spend a lot of time with your advisor through the initial retirement planning process and the ongoing periodic strategy review meetings.  You will share intimate details about your finances, life, goals, and values.  This intimate sharing is necessary so the advisor can proficiently act as your thinking partner and help guide you to outcomes that match your values and retirement vision.

As retirement planning specialists, we’ve met many people who’ve worked with their advisor for years or decades, just to later learn that their advisor has left the business – often at a time in their retirement when they need them most. Here, we cover some of the risks of working with an advisor who does not have a proper succession plan to ensure that you’re looked after if/when they leave the business.

The Real Risk: What Happens If Your Advisor Disappears?

Think about everything in your financial life that’s tied to your advisor relation

• Withdrawal strategies and tax planning

• Investment policy decisions and investment management

• Insurance and estate coordination

If your advisor vanishes from the picture, all of that goes into limbo.  Plus, who is there for your spouse if something should happen to you.

Building Trust and Understanding Pays Dividends

With every interaction, you build trust with your advisor and they gain a better understanding of what’s needed to ensure your retirement plan is resilient and able to roll with the punches.  Trust in your advisor and understanding of your plan are necessary ingredients if you are expected to execute the plan and start spending your life savings without fear or regret.  

At this same time, your Advisor grows more familiar with you, your values, and your goals, enabling more effective guidance. They will be able to guide you behaviorally to prevent potential mistakes during market downturns or to ensure you can stay disciplined and on track with your plan. The time invested in building this relationship can also pay huge dividends later down the road as some of the uglier parts of aging can emerge — such as the following two. 

1). Support for the Less Financially Savvy Spouse

Trust in your advisor and understanding of your plan is critical to ensure the “less financially savvy” spouse is comfortable should something happen to the “more financially savvy” spouse.  

We have found in our experience that financial savvy is not typically split evenly within a household.  While both partners tend to be brilliant and contribute to the household, we find that one spouse tends to be interested in financial matters and the other is not.  As a result, it is often the case that one spouse takes the lead on financial matters.  

Having established a trusted relationship with your financial advisor together ensures a financially smooth transition during what is an otherwise tragic and difficult period. 

2). Support in the Event of Cognitive Decline

Another unfortunate part of aging is potentially experiencing age-related cognitive decline.  Cognitive decline is characterized by cognitive impairment with or without dementia.  Vanguard research from August of 2021 estimates that two out of three adults will experience cognitive decline, with about one in three suffering from its severe form, dementia.  

It has been well documented that areas of executive cognitive function decline with advancing age.  Executive cognitive function involves decision-making, problem-solving, planning and sequencing of responses, and multitasking.

Clearly, your advisor cannot do a full-scale cognitive screening, but they are in a position to observe some of the early warning signs, especially if they have known you well for many years.  Additionally, your advisor would be present to call out and push back on any erratic or harmful decision-making.  

A good financial advisor will know your preemptive plan for cognitive decline such as having appointed specific individuals as power of attorney that can be contacted and brought into the relationship for consultation.

All of these should be part of the Estate Planning basics that you should have in place before retirement. 

Challenges to Maintaining Advisor Continuity

Given the time commitment to relationship building, the complexity of the retirement planning process, and the importance of an advisor in its administration, it is clear that finding the right advisor to be there through all of it is critically important.  Unfortunately, this can be much harder than it sounds due to chronic financial advisor turnover within the financial advisory industry. 

Competition for talent is fierce in the financial advisory world.  Schwab's 2021 RIA Benchmarking Study found that 30% of RIA firms hired new staff they had recruited from other firms.  This same study found that 59% of firms with assets under management of more than $250 million experienced staff attrition.

Add to this the fact the average advisor is 56 years old (according to J.D. Power’s 2023 U.S. Financial Advisor Satisfaction Study) and Cerulli Associates expects 36% of the total industry’s headcount to retire in the next ten years.

How You Can Protect Yourself and Your Family

While there is no full-proof way to insulate yourself from the risk of your financial advisor leaving, there are some precautions you can take to try and root out any potential disruptive advisor turnover issues:

• Work with a partner/owner if you can (they are least likely to leave a firm)
• Ensure the advisor seems reasonably able to endure your retirement time frame (a 55-year-old advisor will probably not be able to work until 85)
• Be sure you know who you will work with if you join a firm (don’t let yourself be passed off to someone you cannot vet first)
• Ask if the firm has a history of reassigning clients to advisors (a very common practice among advisors at larger firms)
• Ask if they are on a partnership track (if not, they may become apathetic with their situation and move on at some point)
• Work only with someone who has demonstrated time and commitment to the industry (no fresh-faced newbies trying the industry out and cutting their teeth)
• Examine the advisor’s work history for signs of frequent work transitions (could be an early warning sign)

Given the immense benefits of advisor continuity and the substantial time you will invest in building the relationship, do not easily settle when choosing who you will work with as your financial advisor.

At Thrive Retirement Specialists, you will only work with an owner or a senior advisor who is on a partnership track. Additionally, we pride ourselves on being flat-fee advisors who only serve as retirement planning specialists to help pre-retirees and retirees achieve their retirement and financial goals.

We believe strongly in and commit to doing what we can to provide advisor continuity that lasts the duration of your retirement.  Click here to schedule an informal, introductory call with one of our retirement specialists to learn more or get started. .