Advice may be timeless, but advisers are not

March 5, 2019 • William Velekei

The wealth management industry has an old problem. Quite literally.

According to a report by Cerulli Associates, more than one-third of all advisers plan to retire within the next 10 years. The average age for a financial adviser is now over 50.

With age comes experience, and experience brings a certain comfort level to a financial advisory relationship. So, typically, affluent individuals are attracted to work with those in a similar age group. But with the beneficial synergies of outlook come potential risks of which clients should be aware. 

Succession plan wanted

The last thing a client wants is to enter retirement only to find out his or her adviser also is retiring. The burden of finding and building an equivalent relationship is difficult and takes time.

A prudent adviser will plan for a client’s retirement as well as for his or her own retirement, creating a succession plan that ensures the continuity and financial success of his or her clients. The best succession plans are communicated to clients years in advance and, most importantly, incorporate firm members to ensure familiarity with a client’s financial life to provide an effective transition.

Unfortunately, many advisers do not have a succession plan. Wealth management has not attracted young talent like it once did. Barriers of entry – including qualifications and regulations – have been raised, and households are demanding more advice and counsel, not just stock tips and returns.

It is important that clients know to whom the advisory relationship will transition, and if they will be comfortable with the transition, should their current adviser want or need to step away.

Firms, not individuals

Clients are inclined to work with an adviser based on personality fit, shared values and trust. Often, the client-adviser relationship is formed within a vacuum at the firm. As important as it is to have a trusting relationship with a specific adviser, it is equally important that the firm shares the same values across all its employees.

Since a client’s retirement could last longer than an adviser’s career, working with an established and trusted firm can help provide the comfort of continuity.  

Teamwork

Whether in search of a financial adviser or already a client with a firm that has a dynamic working team structure, consider the idea of working with a diverse advisory team over one adviser. Just as diversification has investment benefits, diversification of backgrounds offers clients an array of different perspectives.

A mix of established and new within a team is ideal. While younger advisers bring fresh perspectives to an industry changing at a record pace, older advisers offer and provide invaluable years of experience and perspective. Adviser succession then becomes more of a natural progression as opposed to an abrupt transition.

Establishing multiple relationships within a team provides stability through retirement as well as among generations of family to follow.  

Mitigate risk

We often think of risk in terms of the market or investments, yet more and more we have adviser continuity risk. And this risk could affect clients’ financial lives as much, if not more, than traditional financial risk.

Whether you currently work with a financial adviser, or might be thinking of pursuing an advisory relationship, ask the questions that go beyond investments and finances, and avoid turbulence when seeking stability.

William Velekei is a financial adviser with Corbenic Partners, a private wealth management firm based in Bethlehem. He is secretary of the Pennsylvania Institute of CPAs’ Lehigh Valley Chapter

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