Displaying items by tag: retirement

Buying or selling a financial advisory practice involves careful consideration of various deal structures, each offering unique benefits for both parties. The outright purchase is often favored for its simplicity, allowing a single payment or structured financing to complete the transfer and establish clear terms for valuation and handover. 

Another common structure, the gradual buyout, lets sellers retain majority ownership while the buyer assumes increasing responsibilities over time, fostering a smoother transition. In contrast, internal succession emphasizes long-term mentorship, preparing a junior advisor for eventual ownership through training and relationship-building with clients.

 Advisors nearing retirement often use these strategies to secure their legacy and maximize their practice’s value. For advisors or firms unsure about structuring a sale, industry specialists can assist with valuations and guide the decision-making process.

Finsum: It’s also very important to get an accurate valuation estimate of your practice regardless of which method you settle on. 

Succession planning remains a critical yet often overlooked issue in the financial advice sector, with a substantial portion of advisors nearing retirement. A recent Cerulli report highlights that nearly 40% of advisors, representing over $11 trillion in assets, plan to retire within the next decade, underscoring the urgency for succession strategies. 

Advisors without a clear plan risk devaluing the business they’ve built, while thoughtful succession planning can help protect and even enhance this value. Cetera has assisted in numerous advisor transitions and acquisitions, providing advisors with resources to prepare for both anticipated and unexpected exits. 

Proper succession planning ensures continuity, whether through expected retirement or unexpected events like disability, safeguarding both the advisor's legacy and family’s future. 

Finsum: Strategic succession plans prioritize choice, flexibility, timing, and control, helping advisors smoothly transition.

California’s new retirement law, effective January 1, 2025, reduces protections on tax-qualified retirement plans, impacting debtors who may now face increased vulnerability to creditor claims. This law applies a means test to assets in 401(k)s and similar plans, allowing judges to assess how much of these funds can be claimed by creditors based on the debtor’s other assets and timeline to retirement. 

While federal ERISA protections still shield assets within qualified plans from creditors, these safeguards do not extend to distributions, meaning assets will be only partially protected once withdrawn. 

Some debtors may consider relocating to states offering full retirement asset exemptions, while others might roll their assets into self-directed IRAs, potentially securing greater protection through international investments. 

Finsum: The election will play a pivotal roll in the future of retirement regulation and advisors should monitor the developments. 

An unprecedented number of American households are uncertain about the economic future, with many expecting inflation to take a larger portion of their income. Financial stress from the high cost of living and rising borrowing costs has added to the uncertainty, especially in an election year. 

Though consumer sentiment slightly improved in September due to expectations of lower inflation and potential interest rate cuts, the overall view of current conditions remains near record lows. Prices are still significantly higher than before the pandemic, despite inflation slowing.

 A growing number of Americans expect no real income growth over the next five years. Additionally, confidence in achieving a comfortable retirement is at its lowest point since 2013.

Finsum: Inflation hasn’t been a strong concern for retirement in nearly 40 years, but suddenly it is having a critical impact, and investors should consider options accordingly.

Many financial advisors struggle with the idea of their own retirement due to a fear of losing identity and purpose, leading to delayed succession planning. Casey Jorgensen, head of the Dynasty Institute for Adaptive Leadership, emphasizes the psychological barriers that keep advisors working past their prime. 

Advisors often fear losing their sense of self and purpose, contributing to delayed transitions and frustrated potential successors. Dynasty Financial Partners focuses on the emotional aspects of retirement in its advisor succession planning efforts, encouraging advisors to plan not just for what they’re leaving behind, but for what lies ahead. 

Failure to prepare adequately for retirement can negatively impact a firm’s growth and valuation as aging clients distribute assets. Jorgensen encourages advisors to develop a post-career plan to maintain a sense of purpose after stepping down from their careers.

Finsum: A successful succession plan is not only fruitful for the company but for advisors as well and can give other clients confidence.