Planning a smooth transition to retirement

This article was generously provided by James McMahon, president, Financial Horizons Group, Quebec Region, and Louise-Marie Rousseau, Vice-President of Sales, Financial Horizons Group, Quebec Region.


Although the challenges related to succession planning are not new, with an aging advisor workforce and a limited number of successors, they are becoming more acute. The situation is akin to objects in a rear-view mirror that keep getting bigger and bigger as they loom closer. At a certain point, they can’t be ignored.


For independent financial security advisors considering retirement, it is best to take a smooth and gradual approach involving the sale of the business one block at a time.


Implications for independent advisors of selling their business

For an advisor approaching retirement, the decision to sell off his or her business is difficult. The best approach is to go about it gradually, breaking down the transition into manageable chunks.


In addition to stepping away from work and the traditional routine, retirement means bidding farewell to long-term clients whose trust the advisor has earned over many years, trust that was essential to the success of the advisor in the first place. It also means going from being an expert and champion in the field to pursuing other pastimes. In the financial services industry, recognition is valued deeply. After all, after spending years climbing to the summit of success and then striving to stay there, it can be a shock to realize one is once again an ordinary citizen!


Consequences of putting off the inevitable

Advisors who wait too long to sell off their business face other types of challenges and create certain risks:


  • Developing and maintaining their skills is a daunting task that begins to take a mental toll. It can seem like an insurmountable barrier!
  • Compliance requirements become a cloud always hanging over their heads.
  • Having fewer new clients and by extension, new sales, causes their businesses to begin losing value.
  • They overestimate the value of their businesses based on their own criteria and estimates rather than those of the market.
  • They fail to transfer all or any of their files to electronic formats or make use of new technologies, and they do not have a centralized client database or make use of customer relationship management (CRM) software.
  • Maintaining their files was never a priority for them while they were working, and many of them also never had an assistant, creating difficulties when the time comes to sell.


A proven solution

One of the best solutions is to sell off the business one block at a time. Dividing up a business by geographic area makes it easier for advisors to “let go” of each block and this also makes it easier for a buyer to finance. Reorganizing and updating the electronic files one block of business at a time is also much easier, creating a win-win situation for both seller and buyer. The business is divided into concentric circles representing the distance between the advisor and their clients. It is less distressing for the advisor to sell off the block of business located furthest from their home, since these are the clients they have to travel the longest to visit.


Overall, independent financial security advisors should tackle retirement in phases to ensure a smooth transition, maintain control and, above all, preserve the value of their practice until the time comes to sell it off one block at a time.


A similar piece, written by Finance et Investissement, focuses on this same interview with James McMahon and Louise-Marie Rousseau. To read that article, click here. Please note that the Finance et Investissement article was only produced in French.