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Financial advisors spend decades helping clients accumulate wealth, knowing that eventually those clients will draw down their portfolio to finance retirement years. Keeping that client book as dynamic as possible is important for advisors.
“Advisors that grow out their business to provide a more comprehensive wealth service package will more effectively deal with the aging of their book than advisors who spend all their time looking at investments and managing portfolios,” says Andrew Pyle, CFP, associate portfolio manager with ScotiaMcLeod in Toronto. “For people who focus just on investments, there is going to be some impact on their business from that shift to the de-accumulation phase.”
Bullet-proofing your practice
“A full third of my clients are at or near retirement,” says Sterling Rempel, CFP,, from Future Values Estate & Financial Planning in Calgary. “If they are drawing down their portfolio, of course, that means fewer assets under management and potentially meaning lower compensation over time.”
With a number of professional designations, Rempel provides clients with a comprehensive package of services. “I have diversified my business,” he says. “Forty percent comes from my investment clients; another 40% comes from insurance-related products and 20% from group benefit plans.”
Clients always need planning services says Pyle. “Some clients need planning just before retirement. There are planning needs all the way through the transition to de-accumulation,” he says. “Once they reach the stage where they are pulling more out, they are shifting their objectives from growth to income. They still need help with planning services.”
Robert McCullagh, a Calgary CFP and member of Advocis’ board of directors, points out that many retirees have long horizons ahead of them. “Look at the boomers. If I take two people who are 65, there is a 50% chance one will be alive at 90,” he says. “When you live that long, there is a long draw down period.”
Rempel agrees, pointing out that clients should be withdrawing assets only gradually. A properly structured portfolio will generate enough growth to at least partially offset the drawdown.
Your own retirement
Networking and partnering is always part of the strategy for success. Rempel has a colleague in his 60s, and his clients keep asking how long he’ll continue working. “His practice continues to grow and he keeps adding younger clients,” says Rempel. “He points to me as his succession plan—as someone who can help them out when and if he decides to stop working.
“I’m 48, and I know a good young advisor in his 30’s who can be a succession plan for my clients at some point.”
Above all, know your book. “Looking at your client list and adapting to change is critical,” concludes Pyle. “Failure to think about these things will result in a business that you are not very happy with 10 years from now.”
McCullagh also notes clients’ offspring need to be considered. “These clients are not simply putting their money in a suitcase or under their mattress,” he says. “There is a long gradual slope and the question advisors should be asking is, ‘Are you preparing the next generation to receive that wealth?’”
Advisors have a role in preserving family wealth and should look at working with the whole family over time. “Think of the inheritance stream, the wealth transfer from existing clients who are passing wealth on to a younger generation,” says Pyle. “As an advisor you can construct your business to involve more of the family.”
McCullagh adds that the ultimate draw down of assets is at death. “Hopefully the work you’ve done is so successful that the estate plan carefully knits into the next generation,” he says.
Adding to your book
Pyle incorporates changing demographics as part of the plan for a successful financial professional. “You have a change in demographics in terms of new Canadians,” he says. “Many of them arrive with wealth and others are going to start creating wealth just like all of us do. Smart advisors will build practices that are inviting to new Canadians.”
McCullagh says there are a number of underserved brackets of Canadians. “Single mothers can benefit from financial planning,” he says, as one example. Many are professionals, own homes and are planning for retirement.
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