NEXT CHAPTER

Steve Gresham

As more people retire , you ’ re going to have to be a different kind of advisor .

HAT DOES IT MEAN WHEN SO MANY PEOPLE retire at once ? For most financial advisors , it ’ s bad news .

One top advisor frames the challenge this way : “ Our retired clients are our loss leaders . They have the most assets but their needs for service exceed the revenues they generate . It is a drain on the practice .”

Of course , these loss leaders were cash cows not too long ago . Just a few years ago , as the stock market reached its March 2009 low amid the Great Recession , the median age of the dominant baby boomer client cohort was only 54 , which is the peak earnings time for most professionals and business owners . When you piled on the fivefold increase in stock prices they were about to see , your business was likely set to take off like a rocket ship . But that ride might be over . Now the median age is 68 ; the oldest boomers are a pretty senior 77 . Next year , more Americans will turn 65 than ever before ( we hear from the Alliance for Lifetime Income ). And this is just the crest of the wave .

Where There ’ s Smoke , There ’ s A Practice On Fire No advisor wants to warn their management that there ’ s trouble ahead .

They ’ ll be told they have to work harder .

This is also likely unwelcome news to the owners and financiers who bought into the industry . What if they bought into an advisory firm looking at past numbers and figured they could turn those figures into rosy future projections — without factoring in the increased service costs associated with the clients getting older . This isn ’ t the NFL . Your current performance matters more than your past performance . These new owners likely haven ’ t factored in the importance of engaging the next generation of clients so that hard-won , fast-rising assets won ’ t spill off to other advisors .

What if you had brilliant timing and sold your practice during the meteoric rise of the past few years — but now have to make the earn-out from your buyer when it has become more difficult ?

Also consider that your clients are living longer and might stay with your practice decades after they retire . The long-term retired client is very different from the low-maintenance , 50-something who helped you build your firm and , collectively , the industry .

These are just some of the conversations we ’ re going to be having with the industry ’ s new owners .

Some Ideas To Get Used To

1 . Get used to the idea that your clients are going to live longer , which means you should understand the client ’ s entire family profile . Spouses , adult children , aging parents — all of these people will factor into your future services . But that also means opportunities to retain your clients and grow your practice . Do we know these other family members ? Do we talk to them ?

2 . You ’ ll have to focus on client retention . While organic growth from new clientele is generally the measure of business health , it has all but disappeared as the demographic impacts roll over the industry . And if you want to retain aging clients , you must be able to handle their particular challenges . In the October issue of Financial Advisor , I discussed a podcast released by our think tank , Next Chapter , called “ Moments that Matter .” In it , we talked about important life events such as someone becoming widowed or divorced , suffering a major health crisis or going through a cognitive impairment , among other things . Most families will experience one or more of the crises we discussed . And our response as financial advisors when our clients confront these problems will be

26 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2023 WWW . FA-MAG . COM