A Senior Advisor’s Perspective of Sunset Programs

The decision of signing on to your firm’s sunset program often comes down to weighing these 2 key factors.

Consider this: You’re the senior most advisor on a multi-generational team managing nearly a billion in assets at a firm you’ve been with for three decades. Over the years, you’ve assembled a stellar group of seasoned, mid-career advisors, as well as several more junior partners. And it’s a great team—clients consistently acknowledge the high level of service they receive. The business you’ve worked so hard to build is running on all cylinders. You’re earning a good living and, while you don’t plan to retire any time soon, taking advantage of your firm’s sunset program had long been your intention given it offers the path of least resistance—a potentially lucrative path that you feel you’ve earned. But unfortunately, it’s not quite that simple. You may be feeling that the firm you’re at today no longer resembles the firm you joined 30 years ago. Unfortunately, it’s become more of an impersonal corporate giant with a culture that seems anything but client- and advisor-centric. So the thought of leaving your legacy at a firm where the future is far from certain is a decision you wrestle with every day. While the firm’s sunset agreement would certainly reward you for the successful business you’ve built and years of service with the firm, the byproduct of signing on the dotted line would remove optionality for your next gen—tying them to the firm for the next 5 to 7 years.

If you only had yourself to consider, the decision would be far easier.

For any advisor or team contemplating a change, the bar is quite high—but perhaps even more so for long-tenured, senior advisors. In many cases they are “comfortable enough,” have a shorter runway than their younger team members and could likely retire anytime if the “heat in the kitchen” gets too hot. So, what are the real determining factors you need to consider when faced with the choice of signing on to a sunset program vs considering a move? It often boils down to deciding what matters more: The comfort and ease of staying put or ensuring the next gen and clients are best positioned for the future.

The comfort and ease of staying put

Retiring from the firm you’ve worked at for your entire career while realizing the value of your life’s work is a sound way to approach retirement—and there’s certainly something to be said for avoiding the hassles of a move, especially when you’re nearing the latter stages of your business life. While you may be experiencing some frustrations at your firm, a move can be quite disruptive, so taking the time to assess whether the pain of staying outweighs that of moving will help you to gain clarity and establish what you value most.

Ensuring the next gen and clients are best positioned for the future

For years now, many of the major firms have encouraged the formation of teams to enhance the client experience and fuel growth. But these teams also netted deep, long-standing relationships among multi-generational advisors who truly care about each other and their clients. While signing onto a sunset program can be a real win for you and the next gen who will inherit the assets, there’s a catch: The rest of the team will be bound to the firm for the life of the agreement. With so much uncertainty and disruption around changing comp plans, cost-cutting measures and an ever-increasing bureaucracy, it’s no surprise that many veteran advisors often question whether their team and the business they worked so hard to build will thrive and prosper at their current firm—and if further binding the business to it makes sense. So, for those who want to ensure their next gen retains optionality and is well poised for future growth, there are plenty of solid options in a greatly evolved landscape—with solutions that allow all parties to win. For instance, you can choose to move to another firm with the opportunity to receive an aggressive transition deal and then retire under the new firm’s sunset program (in essence, moving once and monetizing twice) or make the leap to independence (with models existing today that offer upfront economics) where advisors can customize their exit strategy while enjoying the tax benefits of business ownership. The decision to stay or go is never an easy one and in an effort to retain assets, there’s no doubt that each of the major wirehouses have crafted enticing sunset plans to incent an aging advisory force to retire in place. Provided you believe – without any ambiguity – that your team and the legacy you’ve built is in the best place for the long-term, and you can live with any and all changes that may come down the pike, then signing onto your firm’s sunset program offers the path of least resistance. However, if you’re worried about what the future holds for both your clients and your next gen, and believe that there are some reals risks (namely changing policies and procedures) inherent in accepting your firm’s sunset plan, there’s a new wave of options available today that are prompting multi-generational teams to reconsider their future. It all comes down to deciding which path aligns best with your goals and how you want to live out the balance of your business life. Related: Independent Options for Advisors in the $50 to $150 Million Range