Like his clients, John Nixon has a dream to retire — and retire well. As a bank advisor, his clients belong to the bank, and not to a book of business that Nixon can sell to build his nest egg. So about a year ago, Nixon got creative.

Nixon approached Michigan Commerce Bank, where's he's worked for the last 15 years, with a plan he carefully crafted to ensure that he's paid even after he retires. While it's not a lump sum that some business owners often arrange for themselves when they're ready to slow down, it's a guarantee that he'll have, as he says, "some piece of the action" for later — instead of just clearing his desk one day and walking into the sunset.

The typical retirement for bank advisors (which he described as "cocktails at the neighborhood lounge and you're done") is precisely what the 56-year-old Ann Arbor, Mich.-based advisor is hoping to avoid. "I've spent 32 years building a book of business and it would be nice somehow to get a residual income, which is what I'm trying to arrange."

To start, he takes approximately one week off every month — and collects a reduced salary in exchange.

Over the next two years, he plans to potentially reduce his time further to two weeks every month, and then reassess.

His goal is to retire completely by the age of 60 so that he and his wife can do some traveling, and see the world while they are still healthy.

Nixon is hardly alone. Bank advisors are often seen as the more staid part of the advisory world. As W-2 employees, they build their own retirement much like their mass-affluent customers — through IRAs, 401(k)s and annuities with some Social Security income thrown in as well.

Unlike independents, their clients don't belong to them, but rather to the bank. So there isn't a big payoff waiting for them from selling their client list one day.

And unlike some wirehouse advisors, they're not likely to make a big career move that will glean a cool million dollars.

However, some bank advisors are starting to arrange new compensation packages for their later years, payouts that take into account their worth — or their clients' worth — to the bank.

Some advisors who have crafted these agreements say they believe the institutions are realizing a rep's value- and don't want to risk seeing them and their clients walk out the door.

Physician, Heal Thyself
Still, not everyone is able to make these kinds of agreements that benefit them when they retire.

Sometimes banks and credit unions aren't willing to consider an advisor's worth when building their retirement plan. And sometimes advisors are so busy taking care of their clients, they don't necessarily turn the microscope on themselves.

Mike Flanagan, an investment management consultant and advisor at Wilson Bank & Trust, estimates that roughly 40% of bank advisors don't think ahead to plan carefully for themselves. Instead, he says, they fall into the same traps that trip up many investors, such as a lack of discipline or an unwillingness to save.

"They still have the illusion that the club they belong to or the car they drive is the reason clients come to them for service," he says. "It's the same things that all people are susceptible to — even financial advisors."

For his part, he struck an agreement with the bank whereby they agreed that the clients he brought on board were his own. As he eases out of his practice, he will be taking some compensation for a period of time.

Jack Butler would agree that bank advisors have an Achilles' heel of sorts when it comes to their own retirement. But he sees their particular fault in not planning for health care needs-their own as well as their clients.

Butler, who spent 28 years with the Social Security Administration made a late-career shift to be an advisor at HTLF Investment Services at Dubuque Bank & Trust. (Note: Butler was the subject of a profile in the October 2012 issue of Bank Investment Consultant and has subsequently retired.)

Even with his pension from SSA and his small 401(k) from the bank, he was careful to retire only when he knew he would eligible for Medicare.

The difference, he says, was paying $700 to $1,000 a month for health insurance, versus $100 a month for a Medicare supplement package.

While he turns 65 in September, the age for Medicare eligibility, Butler retired in June because the bank agreed to cover his health insurance payments for the three months in between. His wife, who turns 65 next year, is waiting another year to retire as well instead of joining him now.

"I think most advisors don't give ample consideration to the cost of health insurance because they don't sell it," he says. "But I timed Medicare to my retirement."

Unlike some of his former colleagues who are younger, Butler didn't look into building a compensation package for the advisory business he built. Nor did he look to transition slowly from the table — and ease into retirement one week at time.

He says his retirement was akin to being on a manufacturing assembly line — he just left one day. "You don't take anything with you," he said.

To be sure, some bank advisors are happy walking out the door on their last day and never thinking about the business again.

But many others are likely to start asking for financial consideration of the business they've built over the years. The goal, of course, is to put in some planning so retirement is something to enjoy.

Elephant in the Room
Others in the industry are hearing and having those same conversations.

"I would say this has gained more momentum than ever in the last two years," says LeAnn Rummel, Cetera Financial Institution's executive vice president and national sales manager. "It's kind of that elephant in the room," she says. Rummel has been working with advisors, banks and credit unions, guiding them on how to build retirement transition packages for their advisors, and has started seeing that dialogue increase over the past few years.

While she knows every financial institution doesn't have a plan in place today, she says they will have one in place down the line — from revenue sharing between newer hires and seasoned advisors as they get closer to retirement, to deferred compensation for a set period of years after retirement.

Others in the industry are experiencing similar conversations surrounding this issue.

Rob Comfort, LPL's executive vice president of business consulting for institutional services, agrees that banks and credit unions are starting to get interested in developing retirement plans for their advisors that value the advisory business that an advisor has built.

"We're seeing some entrepreneurial ideas around succession planning," says the Charlotte, N.C.-based Comfort. "The advisor who is retiring has a process over a period of time where they plan for it. And even after they leave they still share in the success for a period of time."

Comfort says the need to create better retirement plans hasn't been much of an issue in the bank channel until now. And that's likely because the average age of bank advisors is lower than that of advisors throughout the industry. At LPL, the average bank and credit union advisor is 48 years old, while the average age for all of LPL's advisors is 52. So the bank advisors, he says, simply may not have been thinking of their own retirement as much. Until now.

While Comfort says bank advisors should definitely not try to walk away with their book of business, he doesn't doubt some have left to try and gain income from their later years.

So LPL has started thinking of how to work with banks and their advisors to build an option that values the business a rep has built — while also respecting that the ownership of the book belongs to the banks.

"Directionally it's a service we'd like to provide," he says. "I think this will be a 2014 offering for us."

Different Paths, Same Goal
Before setting up his arrangement last year, Nixon had taken advantage of the bank's retirement plan, including a limited match on his 401(k), and opening some IRAs — one of which he used to buy an annuity.

He started saving for retirement at the age of 21, salted away 529 funds as soon as he and his wife found out they were having children. He also does not live lavishly, driving an 11-year-old car with 185,000 miles on it; and he plans to pay off his mortgage by the time he's fully retired. He is a walking example to his clients.

In that same spirit of preparation, Nixon began expanding the roles of the people who worked with him so that they'd be ready to shoulder additional responsibility when he stepped back.

He acknowledges his luck in Michigan Commerce Bank's reception to his proposal — but believes both he and the bank win.

"Look at it from the clients' perspective," he says. "They know the transition is happening, people are spending more time with them than me, so they have time to gain confidence. So it's best for the program."

Starting Over
Starting with First National Bank in 1988, Greg Driskell has built his advisory to 2,000 families across 28 states.

The Creston, Iowa-based advisor knows that his success has given him some pull with the bank over his compensation. Although he has a 401(k) that the bank matches, and also contributes to an IRA, he still crafted a buyout clause with the bank that pays him a portion of the fees as well as commissions over a five-year period after he leaves.

"The bigger this business gets, the more income I bring, the more leverage I have," he says. "And quite honestly if they were not going to give me something, then I would have left and built something I can sell myself."

Driskell also had an incentive. At the age of 32, he had a pension from a previous job that he had to use for another reason, forcing him to start saving for his retirement again. Now 57-years-old, Driskell is even more focused on ensuring he has income he can count on.

And while he doesn't see himself retiring for at least another 10 years, he does imagine a time when he may want to slow down, reducing his days to two or three a week but still earning some income.

Like Nixon, he believes he's in a good position, working for a bank that not only understands his value, but is also willing to work to keep him — and his clients — happy and committed.

"Did they want to give me the extra money?" Driskell asks. "Probably not. But they did. They knew the value of keeping me here. And the value of the buyout? They'll absorb it."

Ted Erickson, a financial advisor with TLC Federal Credit Union, took a different pathway for his later years when he was included in the credit union's executive retirement plan.

Instead of arranging a buyout, Erickson, 47, has a pension of sorts as well — a retention plan he negotiated with the Tillamook, Ore.-based credit union. The plan is based on his book of business, and gives him a set amount of money for 20 years after he turns 60.

The setup has been so successful that Erickson now works with other credit unions to create similar benefit plans for their executives. While the credit unions haven't included advisors in the executive plans yet, says Erickson, he believes they will, particularly top advisors whose books of business are so large that the banks won't want to lose it.

He's aware that he could not have sold his own book of business, but he does know reps who do try to leave with their clients — even with a non-compete agreement in place — so as to have something to sell for their retirement years.

"It's very new for people to look at this for their advisors," Erickson says. "They're looking at what bank advisors make and think, 'Why do we need something else for them?' But the reason is you need to keep them there."

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