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This article appears in the November 2020 issue of Investment ExecutiveSubscribe to the print edition, read the digital edition or read the articles online.

“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.

Advisor says: In January, I updated my retirement plan. I set a target date of about five years. By then, I’ll be 70 and have had almost 40 years of what I believe has been a good run in the business.

Over the past few months, I have begun to wonder if I should think about an earlier date for my retirement, given the impact of Covid-19 on the economy, the markets and my business. Maybe I’m experiencing the “pandemic fatigue” everyone talks about, but my confidence in my ability to deal with whatever comes next for the financial advice industry isn’t what it used to be.

In view of the uncertainty regarding the future, does it make any sense to consider selling sooner rather than later? What impact could I expect, for example, on the value of my business?

Coach says: First, thanks for redoing your personal exit plan. It is my mission to get as many financial advisors as possible to plan for their succession at least five years in advance of their intended exit date.

Advisors motivated by concerns similar to your own have asked me whether they should transition from their businesses earlier than they had originally planned. I have referred each of them to an article I wrote a couple of years ago, in which I speculated on why advisors might want to consider an early retirement.

While the Covid-19 pandemic has certainly changed the context for making such a decision, the points I highlighted back then still apply. Specifically:

  • The combination of an aging client base and fewer new business opportunities for planning, investment and insurance advice, along with declining revenue and rising costs, will lead to lower practice valuations.
  • Unless there are successful ongoing efforts to add new clients, many practice values will decline as more clients switch from accumulating to drawing down assets to fund their retirement or distribute wealth to family members.
  • It is still a seller’s market. However, as the advisor population continues to age, more practices will become available and multiples will begin to decline. The pandemic also may hasten early retirements, such as the one you are considering.
  • That said, today’s buyers have become more discerning and will pay premium prices for above-average books.
  • Money is cheap and today’s buyers have more access to financing, enabling them to borrow larger amounts of cash to fund a deal at historically low interest rates.
  • The need to keep pace with technology to meet client expectations and regulatory obligations will challenge advisors who do not enjoy dealing with tech. Now let’s throw the coronavirus into the mix.

As I have described in previous columns, there are two dimensions to the decision regarding when to retire from the business — one is financial and the other is emotional.

On the financial side, and in response to one of your questions, there is no doubt that financial advisory practices generally change hands at higher prices when the economic outlook is positive and there is confidence in the future. I cannot say that this is the situation today.

The current period of economic upheaval is often compared to the Great Recession of 2008–09. However, in my view, there is a distinct difference between today’s crisis and past crises. In the past, through collaborative and co-ordinated efforts around the world, we could anticipate an eventual — albeit slow — recovery. During the pandemic, the future is far less certain.

First, we are dealing with a deadly, omnipresent threat that knows no boundaries. Second, even though the remedy to this crisis is clear — a vaccine for protection and therapeutics for treatment — despite worldwide efforts to stamp out the virus, returning to “normal” could take several years.

The bottom line, financially, is that the market (and, therefore, prices) for advi­sory practices is likely to decline. However, the good news for some retiring advisors is that top-notch practices and books of business still will attract premium valuations.

The financial decision for you is whether the sale of your practice at this time will yield sufficient wealth to enable the retirement lifestyle you want. Even if you sell your business for four or five times its annual earnings, you will run out of money within four or five years unless you have other assets or income sources — or dramatically change the lifestyle you currently enjoy.

This brings us to the other dimension of deciding whether to sell: your emotional evaluation of what it would be like to stay and to go.

If you decide to ride out the storm, here are some of the things I think you can expect:

  • Higher client expectations with respect to service, access to their information and their ability to “self-serve”
  • Accelerating regulatory requirements for privacy protection and greater liability for security breaches
  • Increased reliance on and ongoing investment in technology for planning, account management, communication, and more
  • A need to use digital media for business development and client retention
  • Increased competition from large players
  • Further disintermediation of the traditional financial advisor by technology
  • A need to change your primary advisor role from technician and specialist to coach, counsellor and cheerleader

I do not expect the full impact of these changes to hit you all at once or even within your original five-year timeline. However, you have to ask yourself: “If these trends are already underway, how am I dealing with them now, and how will I cope as they accelerate?”

On the flip side of the emotional coin, does the world outside your business have greater appeal than your current day-to-day? If you are defined and energized by your business, how will you get your thrills?

Will you miss the people? The action? Being “the boss”? Can you get along without the perks of deductible business expenses? What about the tax benefits of being a business owner?

Do you have a good successor in mind? Will they treat your clients and staff as you would? Will they be a noble custodian of your legacy? Do you have a solid transition plan?

What if everything gets back to “normal” very quickly? Will you regret having made an early exit?

Most important, what will you retire to? How will you spend your time when the initial glow of free days and weeks and months starts to fade?

Clearly, there is no simple answer to your questions — just a lot more questions to ask yourself. Here are my recommendations:

  1. Get a valuation of your practice by someone who understands the financial advisory business so you can assess your financial readiness to retire.
  2. If there is a gap between the value of your business today and what you’d like it to be when you exit, determine what has to be done to maximize the value of your business.
  3. Try to visualize each of the two paths available to you: sell now or stay for five more years. Visualize not just the destination, but also the journey.
  4. Answer the questions above, as well as others that are relevant to you, to weigh your emotional readiness to manage whatever you think might confront you on either path.
  5. Weigh the pros and cons of each choice and declare a winner. Then commit to a plan and implement it.

The truth is that you will exit your business one day. The question is: will you be in control when that day arrives?

Good luck choosing!

George Hartman is CEO of Market Logics Inc. in Toronto. Send questions and comments regarding this column to George’s practice-management videos can be viewed on