The average age of an IFA falls into the 55-58 range which means that as more advisers are due to retire, it will become more likely they will stop working before you do.

Unfortunately this also means you may outlive your adviser. Karen Barrett, founder and CEO of professional advice platform Unbiased, says: “The benefits of financial advice are inherently long-term, so it’s not unusual to have the same financial adviser for years or even decades, as the two of you build up an ongoing relationship. Unfortunately this means you will sometimes outlive your adviser, and may need a new one at a critical time.”

When an IFA retires, or passes away, they would typically execute a succession plan. This might be to pass the business or clients to other advisers within the firm or the business could be sold to another firm.

The industry regulator, the Financial Conduct Authority (FCA), requires sole-adviser firms to have a locum agreement with another firm that would conduct the business in the absence of the adviser owing to unforeseen circumstances and emergencies, including death.

Adam Price, CEO of adviser directory site VouchedFor, says: “Whichever method is used, clients would be kept well informed and be given choices.”

Costs and fees could increase

If you’re looking to take on a financial adviser, or you’re already a client of an adviser who may be retiring soon, it’s essential you ask for more information about succession planning as you could find costs and fees rise once you become a client elsewhere.

Henry Blunt, managing director of Retiring IFA, a mergers and acquisitions firm specialising in financial services, says there’s no harm in asking.

“A client doesn’t want to be sold, but you need to be aware of the charging structure of the purchasing business as it could increase once the firm’s acquired.

“In general in the market, no one charges more than 1% of what’s invested and at least 0.5%, but the figures can be in between or it could be a tiered structure.

“Consumers would already have been around the local market and picked a business based on their own criteria. If they looked for best price at the time, they could find that costs and fees of the acquiring business are higher,” Blunt says.

He says consumers would be wise to look for an advisory firm which has a succession plan with a firm that has more than one director in place. This is because it’s more common for a management buyout rather than the business being sold, and a business with three or four financial planners will provide seamless continuity in the event of death or retirement.

“A one-man band may have a plan to pass on the business to a friend or spouse who’s not in a position to look after clients. If you have work in progress and the worst happens, the paperwork would be put on hold until someone who’s regulated is found to take on the work,” Blunt says.

He adds that if an adviser is part of a network such as Intrinsic, True Potential or Sesame, they may have their own buyout structure or internal process to deal with clients of retired or deceased advisers.

Is the acquiring firm truly independent?

As well as asking about charging structure of the acquiring firm under the succession plan, it’s also prudent for people to ask about whether the new business is a ‘restricted firm’ or ‘whole of market’.

A financial adviser is truly independent when they’re not acting on behalf of any product or provider so they have their clients’ interest at the fore.

Blunt explains: “If an independent business provides whole-of-market advice and as part of the succession plan clients are moved to a firm with a restricted model, it means money can be moved which isn’t in the client’s best interest.”

This point is echoed by Sean Irwin, IFA at DFP Wealth Management Independent Financial Advisers.

“You’ll want to continue to receive the service you require if your adviser retires or passes away. If you’re not happy with the succession plan, for instance the adviser was an IFA but the business is sold to a restricted firm then you may wish to change.

“Also if they say the succession will be to someone only a few years younger than them then you will go through the same process again in a few years’ time when the successor retires and possibly be passed from pillar to post through the firm.”

Ageing sector’s a ‘ticking time bomb’

Irwin goes as far as saying the ageing financial advice sector is a ‘ticking time bomb’, and the problem is particularly acute with the dawn of pension freedoms as more people are opting for drawdown.

“Before the changes a lot of people would simply save up for retirement then purchase a lifetime annuity and wouldn’t need to see an adviser after that for retirement purposes. Now people are opting to have flexi access drawdown and will need retirement advice of the underlying investments in this arrangement. If we assume that they take benefits at 60 and live for another 30 years, it will be the case for many that they could need 30 years of financial advice on these investments. How are they going to get this if their financial adviser retires?” Irwin asks.

He says this means people either won’t get the appropriate advice needed, or with a reduced pool of advisers “we would most likely see an increase in the charges for this service from advisers”.