When 70 is NOT the new 60
When 70 is NOT the new 60
Whilst the latest intergenerational report may be suggesting a longer working life for the younger generations of Australians, current clients of professional firms and advisers don’t seem quite ready to stay on with our senior practitioners.
Conversely however, despite all that has been written and anticipated over the past 10 to 15 years, we are yet to see a significant number of our baby boomer advisers heading for the door. In fact, some industry data suggests almost half of our smaller practice practitioners are not considering retirement until after 65 years of age, and in fact, some 3 in 10 won’t be contemplating retirement until after 70 years of age.
Some of the reasons provided by practitioners for not wishing to retire are “I don’t know what to do with myself after retirement”, “I want to remain mentally active”, “I like working with my clients”, “My spouse doesn’t want me home all the time”, “I don’t like golf that much” and so on.
I recently read an article about those moving into retirement in the US. They were referred to as the Platinum years which I thought was pretty cool.
So, dare I say it? Are you the wrong side of 70?
Are, or have your clients been asking you when you’re going to retire? Have they indicated what they are likely to do upon the announcement of your retirement? That is, will they shuffle off to another provider or will they give your successors a go? If you are a sole practitioner, or perhaps a 2 partner firm, these are some key questions to ask yourself, because the impact upon your proposed exit may be more significant than you think.
So, a couple of observations:
More senior practitioners typically have clients around their own age, perhaps 10 or so years either side, which, for those advisers in their 70’s, a reasonable proportion of their clients are likely to be say 55 to 85 years of age. Some may say, so what! Well, for firms looking to acquire a practice or fee base, or being willing to transition clients over, a significant proportion of clients in this age range are far less desirable. This is likely to lead to a longer sale time, less significant genuine interest in the practice as an opportunity, and/or a reduced price.
Quite often the firms of our more senior practitioners have less competitive KPIs, perhaps because they haven’t been as diligent in monitoring performance and comparing this against market or perhaps because they don’t feel comfortable in increasing certain indicators within their firms such as charge rates and typical fees. Again, this is a negative when it comes to time on market, likely sale price and whether anyone will be willing to acquire the practice.
Client retention begins to slip as clients decide they are going to pre-empt their aging practitioner’s retirement by sourcing a new service provider prior to being told that their current adviser has now decided to move on. Consequently, in advance of a senior practitioner finally deciding now is the time to retire; the firm will experience declining revenue over recent years. Funnily enough, this isn’t so much around questioning the adviser’s competence, but rather knowing that the practitioner is aging and will eventually have to retire. You will find some clients make a move to someone else in advance rather than waiting to see where the retiring practitioner’s refers their clients. It seems to be all about perception.
All of these observations are not good for those practitioners 70 years plus who see a sale in the open marketplace as their primary exit strategy. With this in mind, we are certainly encouraging and recommending to our clients that they serious consider these points as part of their succession and retirement planning.
As I will keep saying; as maturing advisers, we all need to understand that there is a difference between ownership and participation.
We can continue to work and provide advice without necessarily owning the practice.