PASSING THE TORCH

What succession planning looks like for wealth management firms

By Craig Manning

$10.4 trillion. In the United States, that’s how much money is currently managed by financial advisors who are expected to retire within the next decade.

That data comes from market research firm Cerulli Associates and wealth management firm Commonwealth Financial Network. The research, completed and published last year, estimates that some 37% of all financial advisors in the U.S. will retire in the next 10 years, leaving the future management of massive asset portfolios in question.

The Cerulli study also found that one in four advisors are expected to transition out of the industry in the coming decade and remain unsure of their succession plans.

In an industry built on the promise of stability and peace of mind for clients, this lack could bring uncertainty and worry – especially in areas where succession plans still aren’t in place.

At Traverse City’s wealth management firms, those baton passes are already compliance requirements, advisors at major firms are often restricted in how much they can say to the press) succession planning is a top priority as retirement beckons.

One example is Branko Geigich, formerly the executive director of the West

January. While Geigich’s retirement is newly minted, the process of succession involved years of foresight, thought and careful planning.

“With Morgan Stanley, they have a defined program for transitioning yourself out of the business and making sure clients are well-served,” Geigich said. “The goal is to make sure that the advisors that are going to be taking over are people who (the clients) have had a relationship with for quite a while.” starting to occur. The good news for locals with assets under management? At least for the advisors who would speak on record for this article (Note: due to

In the case of the West Bay Group, Geigich’s successor is Jason Idziak, a 20year industry veteran who first came into the office nearly a decade ago.

Bay Group at Morgan Stanley. Geigich, who was one of two founding partners of that local Morgan Stanley branch, led the office for 35 years before retiring in

“He came up from Jackson in 2004 and he had taken over his father’s business, so he already had gone through (succession) to some extent,” he said. “So when we joined forces, there was nothing concrete, but it was our thinking that we should plan long-term.”

Geigich had already decided years ago that succession planning was an important thing to do to protect the best interests of his clients. Joining forces with Idziak was just as much about building in contingencies and redundancies as it was about planning for an eventual end-of-career hand-off.

“From my perspective, it was ‘What happens if I die?’” Geigich explained. “So, I’ve been planning for nine-10 years.”

Geigich got a reminder of why succession planning matters in 2017, when his wife was diagnosed with a rare form of cancer.

“She was something like the ninth person in the world to be diagnosed with this type of sarcoma,” said Geigich, who has been married for 42 years. “Fortunately, it was treated successfully, but something like that starts you thinking.”

The scare prompted Geigich to set a date and begin telling clients about his impending retirement.

“Having that scare and not knowing what the future holds, signaled to us that, ‘Hey, this is the time,’” he said.

Dennis Prout, the owner and namesake of Prout Financial Design, sees things similarly to Geigich.

Prout’s business is a financial planning practice with a strong focus on retirement goals. As such, he said, it only makes sense for the 63-year-old to be planning ahead for his own retirement.

“I would say I’m addicted to what I do, and I think there are a lot of advisors like me out there,” said Prout, who hopes to work into his mid-70s.

Recently, Prout read an Investment News article about advisors in their late 70s or early 80s who are still actively involved in their practices.

“And just generally, I see more clients doing more of a ‘glide path’ to retirement instead of a hard stop,” he said. “Statistically, those people tend to be happier. So that’s what I’d like to do.”

Prout’s glide path toward retirement looks similar to Geigich’s in that he’s been gradually bringing in younger talent to build out his team and develop relationships with his clients.

His hope is that when he’s ready to leave, he’ll have a whole crew of employees ready to take over the business he built in 1985.

“Most practices have situations where each advisor will have their own clients,” Prout said. “We don’t do that. At our firm, we all work on client situations and problems or solutions as they come up. And we aren’t compensated by individual situations, either; we really do work as a team.”

That team includes not just Prout, but also Managing Director Heidi Thompson and Prout’s son Nathan, who previously served as the business’s director of client services but recently became a licensed financial advisor himself. Beyond that trio, the firm includes a support staff that Prout sees as being just as important to the client experience – and therefore, to effective succession planning – as the financial advisors themselves.

“We want our clients to have a familiarity with everyone, because we’re working on acclimating our clients to the team approach that we’re using more and more,” he said.

Trust is an important part of the equation, he said.

“Talking about money is already an incredibly private issue, and being willing to face our own demise, or temporariness, or whatever you want to call it –that’s even harder,” he said. “We want our clients to feel comfortable doing that with us, and that’s all about building those relationships.”