with Cory Schmelzer
Read on US News and World Report
Will your financial advisor be hanging up his or her hat soon? Don’t panic here’s how to make a seamless transition.
If you ask Cory Schmelzer, owner of San Diego Wealth Management, what happens when a financial advisor retires, he can give you an answer that’s more than theoretical. The 18-year veteran advisor has taken on four practices from advisors who left the business and is the in the process of transitioning over a fifth.
That makes Schmelzer something of a succession specialist, and it’s not by accident. He says he’s been strategic about setting up his business so he can absorb clients easily from other firms. “We have capacity to take on a company,” he says, explaining that many firms can’t transition in 100 to 200 new clients.
Given the aging population of financial advisors, Schmelzer may find there is plenty of new business to pick up in the years to come. According to the Certified Financial Planner Board of Standards, nearly half of CFPs are currently age 50 or older.
If you think your advisor may be among those ready to retire soon, here are three things to do so you won’t be scrambling to find a replacement when you get an invitation to the retirement party.
1. Ask if they have a plan.
Ideally, you’ll already have asked about continuity and succession plans, but if you haven’t, do so now. The terms are sometimes used interchangeably, but strictly speaking, a continuity plan describes what happens when an advisor becomes ill or disabled. In other words, it dictates who manages accounts until the advisor is back in action. Succession plans are used in cases of retirement or death, when an advisor is not expected to return to the workplace.
If your advisor hasn’t told you about contingency plans, be direct and ask what happens to your account should he or she retire or no longer be able to manage it. “It might feel awkward to the person asking that question,” Schmelzer says, “but it’s your money we’re talking about.”
Even if your advisor isn’t sporting any gray hairs, you should ask if he or she has a continuity plan or a succession plan.
Jason L. Smith, CEO and founder of Clarity 2 Prosperity Advisory Group in Cleveland, was 29 when he had a serious health scare. It was a wake-up call for Smith who realized he didn’t have anyone in line to take over his clients in case he couldn’t work. Ten years have passed, and Smith has since hired a younger advisor whom he mentored and an older advisor who brought experience to the firm. “Now my clients know we work as a team,” Smith says.
2. Meet their successor, if they have one.
Older advisors may have a successor for their firm or your account already in mind. In that case, ask to meet with this person before your advisor’s retirement.
When meeting with the successor, consider whether their personality is a good fit with yours and their investment philosophy lines up with your goals and preferences. You may also want to consider their age.
“I have some clients who will look at me, assess my age and say, ‘I’m glad you’re younger than me,’” says Len Hayduchok, 54, president of Dedicated Financial Services in Hamilton, New Jersey. “They think they’re going to kick off before me.”
Selecting an older advisor means you may get a planner with more experience, but it could also result in you having to transfer your account to a new professional in a few years. One factor that may determine the importance of a planner’s age is whether he or she belongs to a firm with younger advisors who can easily pick up your account if needed.
3. Use the opportunity to re-evaluate your options.
Schmelzer argues for giving appointed successors the benefit of the doubt, particularly when they are handpicked by your current advisor. “If you have someone who’s a veteran [advisor] and is recommending someone, I would really look to meet with that person and get to know them,” Schmelzer says.
However, you don’t have to remain with someone you’re automatically reassigned to. “If you’re with a big brokerage firm, they’re going to reassign you quickly,” Smith says. “That doesn’t necessarily mean that person is a good fit.”
A financial advisor’s retirement is the start of a new journey for both the advisor and a client. Don’t assume you have to set out on the path laid before you. Use this time as your chance to re-evaluate your investment goals and strategies and confirm you have the right advisor to guide you along the way.