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Loyal Clients Key for Advisor's Retirement

SuperUser Account posted on October 01, 2015

Advisors focus on helping their clients achieve their financial goals, keeping them on track to enjoy the retirement of their dreams. But what about the advisors themselves and their dreams of retirement? Who helps them fund their worry-free retirement?
The answers vary widely in the industry and bank advisors, unfortunately, usually get the short end of the stick. They simply don’t have as many options as advisors in the other channels.

To be sure, there are some creative options being forged today at banks (see our cover story on how some banks are arranging succession plans or their advisors.) But traditionally, most bank advisors have been in the same boat as their clients in this regard.

Most people, after all, do not have many choices regarding retirement income. They work at their jobs, then retire and live off their savings plus any retirement plans they have and Social Security. There is no plan-B other than possibly getting a part-time job.
Most companies will not allow their employees to scale back their work hours each year for the last decade  before retiring.


To be sure, whether an advisor is at a wirehouse, bank or independent firm, they typically have a book of loyal clients. For bank advisors, conventional wisdom  holds that if they leave, they’re likely to have 40% to 60% of their clients who will remain committed to them, a not insignificant amount.

That loyalty can provide the basis of a retirement plan for advisors. But first, that percentage needs to be higher. Most bank advisors simply don’t enjoy enough client loyalty. Even with the various new, ad-hoc solutions in the channel, bank advisors overall still lag the rest of the advisory industry in this regard. But there are ways to face that challenge. For most advisors who are nearing retirement age and are mulling their options, they should consider making a late-career move.


Not all model firms allow advisors total control in their golden years. Let’s consider what I like to call the freedom scale. How free are you as a financial advisor? If 10 represents the most freedom and 1 the least, each model firm can be assigned a rating.

At my firm, the Rummage Group, we classify and rank all institutions. On the freedom scale we rate banks three to five, wirehouses five to six and independents nine to 10.

In retirement, the best option for an advisor is the independent model — the only model that allows the advisor to decide how and when they will retire. It is as if they can custom design a retirement plan just for them.

Let’s look at two real-life scenarios of advisors who wish to start the retirement process.

Scenario 1: Jane Wipenski is a 58-year-old bank advisor with a $62 million book throwing off $580,000 in revenue. She has been at the bank for 11 years and thinks that at least $42 million of assets will follow her. She is also a cancer survivor and would like to work with cancer patients every Monday and Friday starting immediately.

As an independent advisor, Jane could implement this plan at will. Since she will be her own boss, she will only have to answer to her clients. In her semi-retirement, she will net about $250,000 in income. This is after paying all expenses, including a full-time licensed assistant. Having a qualified assistant is critical since she will be out of the office on a regular basis.

Scenario 2: Alfred Kahouse is a 62-year-old go-getter with an $88 million book providing $900,000 in revenue. Although he works about 60 hours per week, he would love to start spending more time on the golf course. He also wants to have the ability to take off about eight weeks every year. If he leaves for an independent, his income should almost double and provide more than enough income for all his travels.

He plans to hire a quality junior advisor and pay him 10% of his revenue. If all goes well, he will eventually increase the percentage every few years until he stops working entirely. Alfred will make in excess of $500,000 after paying his junior and all expenses.
These are just two possibilities for a customized retirement. But remember, most bank advisors are closer to  regular careers in this regard. And with most careers, people are just working as salaried employees. They are paid a salary that ends when they decide to throw in the towel. The company often does not afford them any other options.

Financial advisors have unique options if they play their cards right. This makes it a unique career with numerous retirement options.
If given the option, most people  would love to have the freedom and flexibility to decide when and how often they would work in retirement. That is, instead of just stopping at age 65, what if they reduced their hours worked every year until they just decide to stop entirely?

How about customizing a specific plan for retirement? I am sure asking their  boss to provide a customized retirement plan wouldn’t go over very well for most salaried employees.

Imagine if a 55-year old schoolteacher walked into her principal’s office and said that she wanted to “cut back a little” and planned to working only on Mondays, Tuesdays and Wednesdays for the next 10 years. And maybe after that, she’d just come to work whenever she felt like it. Most bosses would throw her out of their office.

This type of plan is not possible for the average worker, but it is for the average financial advisor. Financial advisors are highly sought after by planning firms. Most advisors are familiar with the types of transition packages available to move to another firm. This is because the firms know the value of the recurring revenue these advisors provide.

Being an advisor really is one of the best careers in the world. If done correctly, advisors will never have to retire, but rather ride off into the sunset slowly, gracefully and contentedly.