The Personal Finance Industry is Aging Out. What Does That Mean for Your Retirement?

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Two businesswomen discussing, mid adult woman with long blonde hair smiling and listening to female manager with short grey hair.

It’s not an exaggeration to say that gray hair and wrinkles are becoming two hallmarks of the financial advisory business.  According to J.D. Power, the average financial advisor today is 55 years old and 20% of them are 65 and older. On the flipside, barely 10% of advisors are under 35.

It doesn’t take a mathematician to see that the industry has a demographic crisis on its hands. If the next generation of advisors doesn’t join the ranks soon we’re at risk of losing out on these service altogether or being forced to settle for robo-advisors, consolidated shops and other less desirable options.

But what does this mean for retirees?

The fact of the matter is, if you’re still in your 50s and your advisor is 65+ there is a very real chance that they will retire before you do. In that case, they’ll either pass your retirement plan off to a younger associate at their firm (of whom there are very few) or simply hand you the keys yourself to manage.

Best case, you end up with a new advisor in the years heading into your own retirement who is overwhelmed with all of the new clients they’re getting from their older colleagues.

Worst case, the last 5-10 years of your working like are on your own. Not to mention the transition to full retirement and everything else that advisors can help with.

Are you ready to go it alone?

Retirement is when advisors earn their money: Generally when your in your 20s-40s you don’t need much financial help. The DIY approach works pretty well when you’re just focused on contributing to your 401(k), saving in an IRA or managing your own index funds.

But navigating the waters of retirement — including tax considerations, estate planning, insurance considerations and more — really does call for some expert help.

That said, there are a few areas to look out for in case you find yourself facing an advisor-less future.

Tax Planning: For most of our lives we’re dealing with tax preparation, that annual ritual where we all go through and pay our taxes every year. Tax planning is a longer term consideration, though, and retirement changes things. Should you consider a Roth conversion to better diversify your income streams? What tax-loss harvesting opportunities do you have to offset other taxes? What are the tax implications of your estate plan.

Income Planning: Personal finance is (almost) easy when you have regular paychecks coming in. But what changes when you’re creating your own income and you need to plan for it months and years in advance? This is where investment timing comes in to avoid damaging losses and guaranteed income, as well as smart 401(k) distribution options.

Estate Planning: What comes next for your family after you’re gone? Many people begin the estate planning process years before they retire with a will and other legal documents, but it really is an ongoing process that evolves over time. It can be done DIY but it’s far easier to work with an advisor who knows the legal and tax implications of the choices you make and who can point you in the right direction.

The simple fact is that retirement planning is possible without an advisor but it isn’t fun. Still, the dwindling number of financial professionals available to help might have many of us staring down the barrel of a DIY retirement. Are you prepared for that?

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