My partner and I have been with our financial adviser for nearly 30 years.
He has been so helpful when it comes to our pension, mortgage and investments in that time through his independent family firm.
He is now approaching retirement age and we are worried about what happens if he retires before us.
Should we ask him about his succession plan and will we have to find a new financial adviser independently?
A financial adviser should make their clients aware of their succession plans from the outset
Angharad Carrick of This Is Money says: It’s good to hear you have had such a good experience but I understand the lack of clarity on the succession plan must be frustrating.
There are more than 5,000 financial advice firms in the UK, according to the Financial Conduct Authority (FCA), of which 89 per cent have five or fewer advisers, and nearly half of which have just one adviser.
The average independent financial adviser (IFA) is in their mid to late fifties meaning more and more will be approaching retirement over the next few years.
Worryingly, research published by consultancy firm Platforum revealed 54 per cent of advice firms’ owners have no succession plans at present, up from 41 per cent in 2019.
Your adviser should be happy to talk about his plans. Even if he retires later you may want advice through your retirement.
Jason Hollands, managing director of corporate affairs at Tilney Smith & Williamson, says: The relationship between a client and their adviser should be very open and built on trust, as they are there to understand your goals and circumstances to help you make better long-term decisions.
I don’t think it is at all unreasonable to ask an adviser who might be approaching retirement age, what their plans are or what would happen to your business if they were suddenly unable to work.
You would expect a professional financial planner to have such a plan in place.
Our senior financial planners typically have younger advisers working alongside them who will get to know clients over a period of years to ensure a smooth future handover, but also be there for the client if the main adviser is away.
Andrew Elson, certified financial planner at Berry & Oak replies: Some firms, especially the larger ones may allocate a new adviser, but often the client isn’t happy with that, as the new person doesn’t know much about them, or their goals and they often feel like they are starting all over again.
This has been especially true of a number of firms that have recently been selling out to large consolidators, where clients can often feel like just another number, not an important client.
We receive quite a few enquiries from clients in these situations wanting to change adviser firm, as they have no relationship with the replacement.
Alternatively, some firms have a strategy in place to bring in a new adviser to look after the client over a period of time.
Angharad Carrick says: As part of a family firm it may well be that your adviser has a succession plan in place and will hand you over to a family member or a younger adviser in the firm.
However, if he plans to sell the firm to a larger firm you may want to consider another adviser.
What happens if you want to change firms?
Andrew Elson says: Clients should ask [about retirement plans] from the outset as there is a lot of movement of financial advisers between firms…
If your adviser is getting on a bit (55 plus) or is starting to make noises about their own retirement, that may be a good time to ask this question if you haven’t already asked it.
Financial planner Andrew Elson
There are commonly agreed processes or regulations that cover this. The client can change their financial adviser at any time and transfer the servicing rights of their existing financial products such as investments and pensions to the new adviser firm.
This will allow them to find out all the required information on your policies and be able to provide ongoing advice on their suitability to you as well as make any necessary changes over time, such as fund choices.
The new adviser will need to ensure they understand your full financial picture and aims and goals and generally this isn’t shared from the old financial adviser firm.
The new firm would probably not want to rely on the information provided by another financial adviser firm anyway, so you would likely need to go through a new fact-finding exercise with the firm, but this is a great opportunity to make sure you’re working with the right firm for you, that really understands what you are trying to achieve and that their client service proposition is set up to deliver this.
Angharad: If you do opt for another financial adviser you should feel comfortable with the credentials of the new firm and an adviser you are introduced to. You should check how their fees compare and whether they are ‘independent’ or ‘restricted’.
Independent financial advisers, or IFAs, will offer advice on a range of investment products based on your scenario.
A restricted service, like that offered by St James’s Place or Quilter, may only use their own investments to create your portfolio, or those from a panel of providers.
To check if an adviser is authorised by the Financial Conduct Authority you can check its register, and you should also look at its warning list to make sure there are no red flags against their name.
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