InFocus: CRM Solutions

Financial advisors need to plan for retirement too

Financial advisors need to plan for retirement too

Financial advisors generally counsel their clients to take a long view, and be prudent in their approach to the future, especially in planning their retirement.

The irony is the vast majority of financial advisors have no exit strategy and most fail to outlast the departure of their founder, according to research from Fidelity Investments and FP Transitions.

“Investment advisors need to leverage technology to help manage their book of business,” says John Easton, the director of wealth management CRM for Maximizer Services Inc. “CRM methodology has helped with managing attrition rates, increasing the number of new clients, and improving the revenue of existing clients. So when it comes time to sell, there is no question about their book value.”

For many in the wealth management industry, the time has come for them to heed their own advice and start thinking ahead toward how they will fund their own retirement, says Easton, as they and their practices mature.

A 2014 survey commissioned by Maximizer of more than 900 financial advisors across Canada and the U.S. showed that 28 per cent of all advisors surveyed plan to retire within 10 years and more than 50 per cent aim to step down within 15 years. The survey further revealed more than 60 per cent of all advisors surveyed are already over age 50 (57 per cent of 90,000 advisors in Canada and 68 per cent the 308,000 advisors in the U.S.).

Despite being younger, more Canadian advisors are planning to retire within 10 years – 38 per cent compared to 9 per cent of U.S. advisors – but the U.S. advisors largely catch up when another five years is added, as 50 per cent plan to retire within 15 years, compared to 53 per cent of Canadians.

“The reality is everyone has to stop work eventually, whether they like the idea or not,” says Easton, “so every owner or partner in a wealth management practice needs an exit strategy and getting the most value for their business – or their share of it – only makes sound financial sense.”

This, however, is easier said than done and few financial advisors seem to have a long-term plan in place for doing so.

What’s more, the large number of baby boomer advisors likely to put their practice on the market in the next 10-15 years makes for a crowded marketplace in future.

However, there are steps a wealth management practice can take to ensure the business is saleable at its maximum value, so when the time comes the owner or partners can cash out – or sell off part of the business – at a level they are comfortable with and on their own terms.

“Organizing the business and having a solid understanding of its strengths and weaknesses is critical to making it saleable for the optimum value,” says Easton. “The key is to start now and not wait until it is too late to pave the way for a seamless and lucrative sale.”

Smaller financial advisors often seem blind to technology and CRM opportunities, seeing these as a tools for the big players. If you want to build the value of your business for sale – particularly its primary asset, the book of business – you need to set any such preconceptions aside and embrace the value that investing in the right CRM brings to a business, says Easton.

“CRM will not only pay off in terms of building the business long before retirement but it will add value when it comes time to sell,” he says.

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