A lawyer’s career is a demanding one. For equity partners, the stakes are higher given the financial commitment required and the increasing expectations from both the firm and clients. The challenges of balancing career and life are also far greater as personal time is at a premium.

As you reach this milestone of achievement, it makes good sense to take stock and reassess both your career plan and financial plan.

Understanding your career lifecycle

As recruiters who specialize in the legal sector, The Counsel Network has worked directly with lawyers of all levels. We’ve had countless heartfelt, confidential conversations about their careers and aspirations. From 30 years of engaging with and listening to equity partners, we have noticed a few similarities and common themes in their backstories. What has become clear to us is a common cyclical progression experienced by lawyers as their knowledge, expertise and comfort zone within the profession evolve.

We have identified four phases in this progressive cycle, each with a unique impact on the lawyer’s life, family and future. There is no set timeline for one to travel through the four phases – in fact, a lawyer might experience the cycle or portions of it several times throughout their career.

1. Educational
   Like anything that’s new, you may face a steep learning curve as a freshly appointed equity partner. The work is challenging and there is excitement in your new role. You may feel overwhelmed, but you are taking it all in stride.
2. Engagement

You’ve got some time and experience as an equity partner under your belt. You feel confident and are motivated. You are achieving targets and making a valuable contribution.

3. Cruising

You’ve established your place in the firm, so your foot eases off the gas. You’ve hit a plateau. You begin to experience boredom and declining motivation. Your mind wanders to thinking the grass might be greener elsewhere.

4. Disengagement

You’re feeling frustrated and unhappy. You start seeing a lot of negatives in things that did not bother you before and may be heading for burnout.

As an equity partner, you should take these developmental phases into consideration when developing an effective plan at the pinnacle of your career and as you build a lifestyle that will eventually take you into retirement. Until that time arises, it is important that you proactively seek learning opportunities that combine your talents, values and aspirations as you navigate the four developmental phases. This might mean exploring new roles inside or outside your firm. Critically, this means recognizing the tell-tale signs and laying the groundwork for new learning opportunities before you hit the cruising phase – or worse, slip into disengagement. A misstep here could trip up the long-term health of your career and reputation, as well as your family life.

Thriving professionally and preparing for retirement

As an equity partner, you are in a period of professional success and personal fulfilment. If you are a parent, you may be seeing your children finishing school and leaving home, which can lead to more time and freedom for you to explore personal interests. At the same time, at the peak of your career, you are witnessing your experience and expertise reflected in your professional recognition and remuneration.

So what are the key financial considerations that should be on your radar?

• Becoming an empty nester
• Having more time for hobbies and charitable/philanthropic work
• Preparing for early retirement
• Spending time abroad (vacation home/traveling)
• Spending time with family/grandchildren
• Suffering from additional health problems
• Caring for elderly parents
• Dealing with the death of a spouse

A unique set of personal and professional developments have shaped your life up to now, so your financial needs may differ from those of your peers. Nonetheless, there are basic financial steps that generally make sense for equity partners.

Ensuring your family’s financial goals are met

From a financial perspective, your family’s financial goals should be on track. If this is not currently the case, make the necessary adjustments to avoid surprises. While you may experience an increase in disposable income if your children move out or you finish paying off your mortgage, it’s important to ensure your future financial needs are taken care of before you rush off to spend your surplus income.

Here are eight key steps that you can take – in addition to the steps that you took during your path to partnership [hyperlink to sr. Associate article] – to ensure you stay on course for a bright financial future:

1. Start planning now for succession of your practice. After spending years building a successful practice and portfolio of clients, the last thing that you or your firm wants is the client relationships falling apart or fading away once you’re out of the picture. This is why succession planning is critical. Finding the right team of lawyers to take over important client relationships takes time, but this is time well spent if it leads to a smooth transition.
2. Free the trapped surplus in your professional corporation. There’s a good chance you’ve built a significant financial surplus in your corporation over the course of your career. As you now inch closer to retirement, you may be wondering how to maximize the amount of this surplus that will end up going to your family rather than taxes. One tax-efficient strategy to consider is corporate-owned life insurance. By purchasing life insurance with dollars taxed at the corporate tax rate rather than your personal tax rate, you can potentially save many thousands of dollars in taxes when the proceeds of this policy are eventually paid out to your family. This is most effective when implemented while you still have a suitable career runway to justify the placement of corporately owned insurance.
3. Top up your RRSP. Many lawyers are near the peak of their earning potential at this point of their career, making this a great time to maximize RRSP contributions. This is especially true if your household expenses have declined – for example, if you’ve paid off your mortgage. By directing surplus income to your RRSP, you can reduce your tax bill now when it’s at its highest and defer the tax until you start making RRSP withdrawals in later years, at which point you may be in a lower tax bracket.
4. Grow your RRSP while managing risk. The closer you are to retirement and the time when you will start drawing on your RRSP, the more important it becomes to reduce the risk profile of your investments as you will have less time to ride out a major market downturn. As your RRSP may be a key component of your retirement plan, it’s crucial to protect and optimize
5. Choose assets aligned with your changing risk profile. As your risk appetite declines, permanent life insurance remains a versatile financial tool that can help you transfer wealth to your loved ones in a tax-efficient manner. Even in your 60s and beyond, if your health permits, you can purchase additional coverage, or better yet, convert term insurance that you bought in the past into permanent life insurance. The latter approach lets you bypass medical testing, so it’s an option even if your insurability is questionable due to health reasons. Permanent life insurance may include tax-free investment growth with the policy and a low- or no-tax payout to your beneficiaries upon your death.
6. Get your estate in order. Caring for your family is of utmost importance, and estate planning is a critical component of this. Yet nearly one in six Canadians has a will that is not up to date, according to an Angus Reid Institute poll. Taking the time now to establish clear plans can save your loved ones significant stress following your death – a time when they should instead be focused on grieving. In addition to having an up-to-date will, another key aspect of a solid estate plan is ensuring that your loved ones are looked after financially after you’re gone.
7. Obtain long-term care insurance. A loss of independence following an accident or due to a long-term illness is one of the greatest challenges that some Canadians face as they grow older. Statistics Canada data suggests that 6.8% of Canadians over 64 years old live in a nursing home or seniors’ residence. Long-term care insurance can complement disability and critical illness insurance to provide additional financial support if you become unable to care for yourself. This coverage can help provide peace of mind that you will be able to afford in-home care or extra support in a retirement home should you one day require it.
8. Plan your legacy. The wealth that you build during your lifetime will, with good planning, likely outlast you, so what do you want it to do after you’re gone? To develop a clear purpose, it’s important to ask big questions so that you can see the big picture. While you will likely leave some of your wealth to loved ones, you may also have the ability to make a significant impact in areas meaningful to you by directing some of it toward philanthropic causes. The key is to approach this issue thoughtfully with input from family members and advisors so that you can make meaningful decisions.

Staying on track with a clear plan

If you find yourself riding high on personal and professional achievements as an equity partner, remember to keep pushing ahead with your wealth management plan so that these good times can continue into retirement and beyond. On the other hand, if you feel financially unprepared at this juncture in your career, the good news is that it is never too late to take action and improve your situation.

For any lawyer, there is great value in working with trusted individuals who can act as a sounding board and guide you toward choices fully aligned with your needs. And while it’s beneficial to start with both career and financial planning as early as possible, it’s never too late to begin tackling these important issues.