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Retire or move: What’s an aging advisor to do?

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After recent changes to retirement deals, particularly by Wells Fargo and Merrill Lynch, some advisors may find themselves with a dilemma: Do I take the amount offered (up to 275% in some cases) or do I go to a new firm, get a transition package and then retire?

It’s no idle question for scores of advisors. According to a recent Cerulli Associates report, the average age of financial advisors in the U.S. was 52 at the end of 2017. Over the next decade, more than a third of all advisors are expected to retire, Cerulli says.

So, if you stay at your current firm, then you may — depending on your production, length of service and assets — get a lot of money for basically doing nothing. Of course, the backend payments may be contingent upon most of your assets staying with the inheriting FA. You generally will also need to sign a non-compete so you can’t join a competitive firm upon retiring.

If you choose to join another firm, here is what you will find — again, depending on your production and assets— you will get a recruiting deal of up to 200% to 330% of your T12. This is typically a nine to 10 year contract. You may also be permitted to retire earlier if you want to (then the offer is prorated). The upfront portion is anywhere from 100% to 175% and with an early asset bonus you can receive 200% very early on. In addition, the receiving firm will sign the same retirement package for you once the nine to 10 year contract is up.

Another option some advisors choose: go independent. Although the upfront will be significantly less (generally maximum of 100%), your payout could be as high as 90%.. You will also be able to sell your book when you are ready to retire to FAs affiliated with your clearing firm at fairly close to what you would get from your current firm.

This is the quandary financial advisors face. If you don’t need the money and are happy with your current firm, it’s probably best to do nothing. If you want to get the total of two times what you would get by staying at your current firm and/or want a better environment, you should consider the competitive firms that appeal to you. Most recruiters know all the options that are available. Once you enter the retirement program at your current firm, it will be difficult to get out of it because you are usually paired with another FA who will be purchasing your book and there may be some penalty if you back out. In this case, I’d suggest you discuss it with a lawyer.

Life is filled with choices, but this is among the most significant.

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