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Planning ahead: Some day, your financial adviser will retire, too

Steve Nyvik (left), Adrian Mastracci (centre), and Constantine Lycos of Lycos Asset Management pose at the company’s offices in Vancouver last Friday. Like many financial advisory and investment firms, Lycos’ senior management figures are approaching retirement age, and are having to prepare succession plans for the company.


Adrian Mastracci wants to make one thing clear: he's not retiring any time soon. However, the 69-year-old portfolio manager is making plans for when that day eventually comes.

Mr. Mastracci's KCM Wealth Management recently joined forces with another Vancouver-based independent investment advisory and portfolio management firm, Lycos Asset Management, and its 40-something money managers, Constantine Lycos and Steve Nyvik.

Mr. Mastracci took his time finding a firm he considered to be a good fit with KCM, which he started in 2000. He was looking for colleagues that his clients could feel comfortable working with if he were to get sick, go on an extended vacation or for when he does stop working some day.

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"I wanted to give myself and my clients another avenue … someone else who will look after them with the same outlook as I have," Mr. Mastracci says. "I don't want to leave anybody in the lurch … With clients, you have to have a plan."

Money managers want to retire, too

Succession is a major issue in the investment industry today, for its professionals and their investors.

Many of Canada's most successful money managers are baby boomers that have spent years building up their client base. When it comes to retirement planning, not only do they have to recruit younger replacements who can step in and some day take over, but money managers also need to ensure clients are happy in their new financial relationship.

Some investors might find the switch difficult, especially after years of discussing their personal, private financial details with another person.

"Talking about money is probably more intimidating than talking about sex," for some investors, says Rick Robertson, an associate professor at Western University's Ivey School of Business. "There's a massive amount of trust involved."

Still, it's a transition most investors will have to go through at some point.

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"It's hard to believe that, if you live a good, full life, that you won't outlive the working career of your adviser," Mr. Robertson says.

The change is perhaps more a concern to investors in or approaching their retirement years. That's arguably when investors rely most on their money managers to plot how much of their portfolio they can spend and potentially pass on to future generations.

Breaking the retirement news

To help prepare for a new financial relationship, Mr. Robertson recommends investors be pro-active and ask money managers about their succession plans. That includes what happens when they retire, if they get sick, or – as unpleasant as it might be to bring up – if they die.

"It wouldn't hurt to ask, even when the person doesn't have that much grey hair. Do you have a succession plan? What would happen if something happened to you?" Mr. Robertson says.

Katie Walmsley, president of the Portfolio Management Association of Canada (PMAC), says firms also need to be pro-active about discussing succession plans with their clients.

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"The fact is that people do leave, do move on, do retire, do get sick," she says.

Money managers looking to retire should start preparing their clients at least a couple of years in advance, Ms. Walmsley says.

PMAC has recently held information sessions for its members about succession planning, including legal and regulatory considerations for selling or transferring a business, as well as how to approach the issue with clients. "The personal piece has to be carefully managed," she says.

Firms should also ensure that future leaders have a similar philosophy and outlook as those who are leaving, to help maintain investor confidence.

Taking a team approach

Norman Levine, managing director of Toronto-based Portfolio Management Corp., said his firm is looking to bring on a new, younger partner to help manage its growth today and as part of its longer-term succession plan.

"We need someone who is going to be around for a while," Mr. Levine says.

In the meantime, the company tries to ensure clients that their money is being managed by a team of people, and not one individual.

"I may be the contact," for some of the firm's clients, "but we make our investment decisions as a group," Mr. Levine says.

As far as his own career plans, Mr. Levine turned 65 in December and says a lot of clients have been asking about when he plans to call it quits.

"I'm not going anywhere," Mr. Levine says. "I just came back from vacation and for the last half was itching to get back to work … I can't retire."

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