Several years ago I came across a news item that described a recently adopted regulation in India (a country to which legal work is increasingly being outsourced) stating that if you are not licensed by the age of 45 you cannot become an advocate. “We don’t want the Bar to become parking lots for retirees,” one official was quoted as saying. The inference seemed to be that older lawyers are either less effective, more careless or a combination of the two.
Do You Want to Retire?
Of course, older lawyers who keep up with evolving professional rules and trends by participating in continuing education, and who apply the client service lessons presumably learned throughout their careers, should have no trouble remaining in practice as long as desired. But even lawyers are not immune from the inevitability of demographics.
Although their populations differ in size, Canada and the United States have a similar demographic profile in terms of the ages of their respective populations. And in the U.S., because the “Baby Boom” generation is reaching retirement age, the current estimate is that 400,000 lawyers will reach retirement age at some point within the next 10 years.
Certainly all of these lawyers will not necessarily retire. A recent study by the Altman Weil legal management consulting firm stated that the closer to retirement a lawyer gets, the more likely he or she is to oppose a mandatory retirement age. Interviews with a number of aging lawyers suggest that they don’t want to retire, but many do want to work only part-time.
Retirement has its negatives. In my own experience, I watched my father retire from a very active family business in which he had for years worked many hours a day, seven days a week. As a young man, I could never keep up with the time he spent in the business, which he called his hobby.
Finally, we agreed to sell the business and he retired. That was a disaster. Over the next six months, I saw him become listless and bored, and his skin turned an unhealthy yellow. He was a man who had spent an incredible number of hours working hard and enjoying his every moment in the business. Then, suddenly, no one seemed to need him.
But the purchaser of the business made some tactical errors, and the profitability of the business quickly declined. He called my father and asked him to head what was now a division. He accepted the challenge. Suddenly, his skin turned to normal colour, his step quickened and he felt joy once again.
Will You Live to Retire?
Many people do not get a second chance such as this. A while back I learned of a story that is all too common in our profession. The widow of a California lawyer sought to work through the problem of closing her husband’s practice after his death, for which he had not prepared.
She found little information in his files and received little help from others. She hired a practice management attorney who cost a great deal of money but provided unsatisfactory service. The practice was wound down, but the process was difficult and stressful.
The lawyer who has not taken the possibility of his or her untimely death or disability into account for planning a practice’s future is playing with fire.
Can You Avoid Retiring?
Consider another common situation, a lawyer with younger children and an older spouse. The spouse suddenly has a serious illness, and the lawyer wants to devote more time to care for the spouse than the practice allows. Without having planned for a sale, what are the alternatives?
- Ignore the illness, hope for the best – and always live in fear of family and financial loss.
- Groom an associate to temporarily take over the process – and, upon returning to practice, face the loss of clients to the new lawyer with whom they have bonded.
- Merge with or hire another partner-level lawyer who has an option to buy the practice – and risk having the other lawyer leave or otherwise reject the deal prematurely.
- Buy another practice to add more lawyers to your own while adopting a more detached, managerial role – and incur the major expense and risk of an unplanned expansion.
Lawyers have many choices about the future of their practices. The first choice needs to be what should be done with the practice as the lawyer ages. Sell it, merge it, or simply close the doors and walk away?
In my experience, most lawyers still believe that their practice has no value and cannot be sold. The truth is quite the contrary. No matter what the purchase price may be, every practice does have value and can be sold.
Years ago, when I was the chief operating officer of a mid-sized law firm, I had a conversation with the primary rainmaker in the law firm. He maintained that, despite the size of the firm, the size of our revenue stream, and the quality of our client relations, our firm had no value.
In retrospect, I should have asked him, “Would you please give me the million-dollar certificate of deposit that you maintain in the bank?” Obviously, the answer would have been “no.” That money was set aside to benefit his family and heirs; why would he give it to me? Similarly, why ignore perhaps the largest asset in your estate, your practice? Why would you throw away so much value that would otherwise go to your family and heirs?
Have You Planned for Retirement?
Transitioning out of a legal practice is above all an issue of planning. If the practice is not sold or closed, the best alternative is grooming a successor brought on board as an associate or a lateral partner.
Ideally the succession plan can be structured to transition over a period of up to five years to identify the successor, to verify the competency of the successor and to gradually transition client responsibilities to the new lawyer. These five years can be seen as the “red zone” of your career – the area right before you reach the goal line of retirement. During this period, you can forge new ties between your successor and both current and new contacts at the client, and ensure that the new lawyer is completely up to speed on what the client needs and expects.
Before reaching this point, it should go without saying that life insurance, plus a disability policy, is a prudent step for any sole practitioner. You must be reasonable on the kind of policy you choose – a desire to maintain your family’s lifestyle unchanged if you were unable to practise may be outweighed by the cost of such a policy’s premiums.
You will also need a will and an estate plan that makes legitimate application of all the advantages allowed under law. The plan can estimate and minimize estate tax liability exposure, create trusts to conserve assets and minimize tax impact, provide financially for all the expenses necessary to close a practice, and properly value the practice for estate tax purposes.
What Will You Do With Retirement?
Assuming you’ve made all the appropriate plans and preparations, from lining up a successor to crafting an effective estate plan, the question becomes: if you retire from the law, what will you do with the rest of your life? You in effect have a “second season” in which to begin anew; what will you do with it? The issue goes beyond the business of law – we’re talking about the business of life. Will you seize the opportunity to begin anew, or be warehoused and wait to die?
With life expectancies as long as they are today, and likely to increase, there will be a great deal of time left to occupy yourself with other activities. What will they be? The answers are certainly different for every individual, but you won’t begin to learn them until you ask yourself the right questions. With the proper preparation, you can spend the final years of your life enjoying the fruits of your labour as you choose.
A final note. I write this article at a time when the global financial crisis has created fear and confusion for countless people. Lawyers, like many others, suddenly have seen nest eggs shrink dramatically and fear they may outlive them if they don’t continue working. Just remember that whenever there is this much change, there is also opportunity.
Pinch yourself, do meditation or find some other mechanism to stay free of stress to be able to see those opportunities. They do abound. We just need to “stay above the noise,” be patient and observant – the traits every lawyer learned in law school. It’s time to apply the lesson to life.
Ed Poll helps lawyers be more effective with their clients, deliver their legal services more efficiently, and become more profitable. He teaches lawyers what he learned in the pickle business. He may be contacted at edpoll@lawbiz.com, www.lawbiz.com, www.lawbizblog.com, or (800) 837-5880.