The Financial Plan For Financial Planners

Earlier this year, the  Heath Report found that 5% of all financial advisers and planners have immediate plans to retire and think about their financial plan. A further 16% hope to retire in the next five years.

That’s 1,650 advisers with immediate plans to retire, and another 5,280 planning to leave the industry by 2024.

Considering that the average age of an adviser is now in their mid-50s, there’s a big chunk of the IFA community thinking about their exit strategy.

In my experience it’s typical for an adviser or planner to plan their exit around a year in advance. However, the truth is that you might achieve much better outcomes if you started succession planning five years before you decide to retire.

Manage your client and adviser relationships

Many elements of a strong succession plan come to fruition over time and require long-term resource commitments. You might find that if you wait, you end up with fewer options.

As good succession planning could be crucial to your own future, thinking about the direction of your company five years ahead of retirement can help you in two key ways.

Firstly, you’ll have longer to manage the relationship between your client and their new adviser.

Continuity is essential to maintaining the trust you have built up with your clients. Managing the transition to a new adviser over a longer period helps you to ensure you get the right adviser for your clients.

Make the same long-term commitment to your clients as they make to you.

Managing this transition over a five-year period will also help you to ensure your advisers remain on-side with any changes the new owners want to make to processes or advice.

And, the knock-on effect of retaining your best clients and advisers is that it is one way to help you to secure a better price for the business.

Get more value for your business

Here’s another key reason to think long-term.

When you decide to sell, one of the most common ways of valuing your company is based on your recurring income. Advice firms are normally valued at around two to four times the annual amount.

One of the advantages of selling your business over a longer period (rather than selling up and leaving) is that the payments your buyer makes for your business can be spread over a longer period.

This has the effect of tending towards a higher acquisition value. The longer the payout period, the more you can expect to receive.

What this does is give you a useful income stream during the sale period. If you were to sell your business over a period of five to ten years, the payments could act as a pension for you during the transition to new ownership.

Time to think about succession planning

The data tells us that advisers are leaving the profession. If you’re one such adviser, answer this question: if you have a one-year rather than a five-year succession plan, will you get the best when it comes to selling your business or clients?

It’s time to think ahead. Some might call that a financial plan for financial planners!


Simon Goldthorpe

Executive Chairman, The Beaufort Group