Why every lawyer needs a succession plan
“The decisions you made 10 years ago will be the decisions you live with today”: Lawyers are being urged to prioritise succession planning, with a former chief executive partner noting how financial decisions made today can significantly impact the quality of life in retirement.
Speaking on a recent episode of The Lawyers Weekly Show, Commonwealth Private’s national director of professional services, Alen Sirol, and Clayton Utz’s former chief executive partner, Bruce Cooper, shared insights on why every lawyer should consider a well-structured succession plan.
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“The decisions you made 10 years ago will be the decisions you live with today. If you made some poor decisions or made no decisions 10 years ago, then it’s very difficult for you to unwind those,” Mr Cooper said, noting that it’s vital legal professionals live within their means and “be realistic” about their retirement expectations.
“Don’t always think that salary that you’re receiving now is going to be the salary you will receive forever. Let that moderate how you organise your life,” he added.
“If you’re looking at retirement, you’ve got to think about what you can possibly live with, not what you could possibly want to live with. It has to be rooted in reality.”
Mr Sirol concurred with Mr Cooper’s assessment while also acknowledging the constraints lawyers might face when it comes to investment choices due to independence and conflict of interest considerations.
Many lawyers, he noted, gravitate towards property investments, which have historically yielded substantial returns. However, instead, Mr Sirol encouraged diversification and urged lawyers to consider other asset classes, such as commercial property, to ensure a more stable financial future.
“If the [residential] property market hadn’t done as well as it did, it would be really interesting to see what the opinions of the partner cohort more broadly would have to say about their inability to invest in some asset classes,” he flagged.
“You really need to be considering all options as early as possible in your career because, yes, you’ll have the independence considerations, but it doesn’t mean you can’t invest money through your super fund in a particular way. It doesn’t mean that you can’t get involved in potentially other types of property assets that you may not have considered, like commercial property.
“There are actually other options for growing wealth, and the earlier you do that, the better you will be for it. And, of course, you couple that with the advice and the mentorship, and it’s really quite a strategic, smart way to go about planning your career and your eventual retirement and the wealth that you build up.”
If lawyers are to be serious about their finances, they must consider a more stable wealth-building strategy that goes beyond a single asset class, Mr Cooper added.
“I think the escalation of property asset prices has made people particularly lazy investors because it has delivered so much return over the last 20 years. But if, God forbid, that escalation starts to slow, then people have to be far more clever and far more thoughtful and far more forward-looking as to how they’re going to build that nest egg and not simply rely upon the usual game of property investment,” he explained.
“… [You need] to be quite proactive on how that wealth is going to be created. I raised the real estate point because I think that created an ease of investment and an ease of capital growth, which may or may not be there in the future. Had we been having this conversation way back, 30 [or] 40 years ago, we probably wouldn’t be talking about property in the same way as we are now. We might be talking about other assets.
“There’s always that sense of every boom has a time when the boom is no more. And if we concentrate on an asset class [that] has consistently outperformed, then at some point in the future, it may not. I think we have to go early on thinking about what financial structures are appropriate for us to build that steady wealth as opposed to the ‘boom wealth’.”
Mr Sirol agreed, noting there is no one-size-fits-all approach to best practice financial planning.
Going forward, he underscored that each lawyer’s financial plan should be tailored to their specific circumstances and goals, and that seeking advice early in one’s career was crucial to establishing a solid foundation for future financial success.
“It is case by case, and that’s the case for pretty much any financial plan or any financial considerations that are long term,” Mr Sirol said.
“The key takeaway really is that you just need to get in front of the right people as early as possible in your career so that you can set yourself up for success. And success is whatever you think it is for yourself, right? For some people, success is millions of dollars in a bank account. For others, success is finding a nice balance between home life and work life. It just depends on the person and what they want to achieve.”
NB: This transcript has been edited slightly for publishing purposes. You can listen to the full episode here: